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Discussion:Scorp officer wage pt

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Discussion Forum Index --> Advanced Tax Questions --> Scorp officer wage pt


Discussion Forum Index --> Tax Questions --> Scorp officer wage pt

Taxaddict1 (talk|edits) said:

5 March 2014

Taxaddict1 (talk|edits) said:

5 March 2014
The sole officer has been taking salary from a Scorp. But his wage last year is way too low. He is willing to take action to correct the situation. I wonder what options are still available to him now. Is there a standard procedure that can be followed to adjust the previous year salary of an Scorp officer in order to make it become a reasonable and acceptable (to the IRS) amount?

JR1 (talk|edits) said:

March 5, 2014
I had one client that for two years, I just bonused a boat load out in January/February, and noted in my files that it was for prior year earnings. I have NO idea if that would have any chance on audit, but I thought it was darned clever! lol The point to me is that we're trying to establish that we are using a reasonable salary, and paying SS taxes, and that we just didn't have the final numbers to establish the proper bonus until after year end. And since S corps can't accrue salaries to officers...blah blah blah. Kind of late to amend PR returns, tho' that's your other option if you're willing to eat the 10% penalty on Fed taxes.

Bushmaster (talk|edits) said:

5 March 2014
I have done what JR1 has done here. I think it passes the smell test.

JackTraffic (talk|edits) said:

8 March 2014
I think the bonus idea is pretty good. I haven't done it myself. But it sort of honors the spirit of the "reasonable compensation" requirement.

Captcook (talk|edits) said:

8 March 2014
I met with another CPA in town who proposed reclassifying distributions as "directors fees". This is something that could be done after the fact AND reported on the officer compensation line. Although, reasonable compensation wasn't an issue with this particular client.

I told him I thought it was 'wacky' and he got kind of mad. He was also proposing that the owners could take all the expenses they had previously claimed as UPE against the directors fees on Sch C. I think the only reason he brought it up was because he didn't properly plan with the client.

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