S Corporation Compensation and Distribution Planning

S corporation owners often want to reduce payroll taxes or simplify compensation, but the wrong mix of wages and distributions can create audit risk and unexpected payroll and income tax issues. In this session, we’ll focus on practical planning for owner compensation and factors affecting the ability to take distributions. We’ll take a close look at computing reasonable compensation, how benefits and reimbursements fit into the owners’ situations, and how to coordinate payroll and year-end reporting. We’ll also cover common problem areas that trigger IRS scrutiny and how to document decisions to support the position taken on the return.

Objectives

Upon completion of this session, you will be able to:

• Explain how S corporation owner employee compensation differs from distributions for tax and payroll purposes
• Identify factors used to evaluate reasonable compensation and apply those factors to common owner scenarios
• Determine how to report wages, shareholder distributions and other owner payments to support accurate year-end filings
• Evaluate how fringe benefits and shareholder loans affect compensation and distribution planning
• Recognize common compliance issues

CPE