S Corporation Taxes
S corporation taxes are a great revenue source for the IRS.The government is running low on money, so the IRS feast on S corporation taxes and company owners has begun. The IRS has kicked into action and they are going after tax shams with a vengeance. The S corporations have been particularly vulnerable.
You may be thinking that this does not apply to me, but it could. In the last year the IRS has been targeting S Corporation taxes on owners who take low salaries so they can receive the bulk of their income in corporate dividends, which are not subject to payroll taxes. These cases are being found and prosecuted. The Courts are standing behind the IRS and ruling that this is indeed a tax sham.
The S corporation taxes case cited is an accountant who took a $24,000 a year salary. His share of the annual profit was $200,000. The court agreed with the IRS that his pay was unreasonably low. His salary was reclassified and he was hit with payroll taxes and penalties. If you were to ask him he would tell you that the IRS feasts on S corp owners is a reality.
Don’t be a turkey! Take a look at your S corporation taxes. If you find your salary is unreasonably low for 2013, it may be a good idea to reconsider this plan and take a larger salary. The amount that you save on this arrangement is not worth the time and penalties that this will cost you. There are other techniques you can use to save taxes that won’t get you in trouble. Take a look at my ten tax tips. It is free.
By Lee R Phillips
