05-02-2005, 05:15 AM
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 Re: Small % of S corp profit paid as wages - problematic? Bill Brown wrote: - quote - > Lance Mannion wrote:
But if someone made a habit of doing this might tempt them.> > I noticed on a past return that I only paid 15k as a W2 > > wage, and 90k on Schedule E for my S corp. I know this > > does not meet the "reasonableness" test. > > > Are my odds of audit greatly increased? > > Would they just reclassify it all as wage? > > What would be the penalties? > Did you take non-salary distributions from the S-corp? If > not, then you likely will not have a problem, even if > audited. If you did take distributions in excess of your > "salary," then, upon audit, the IRS is likely to reclassify > some or all of the excess as salary and assess the S-corp > for FICA/Medicare plus penalty and interest. > The maximumm penalty for underpaying FICA/Medicare is 100% > of the tax due. I understand the IRS seldom assesses that > penalty. -- Frederick E. Jorden http://Tax-Accounting-Payroll.com 7825 Midlothian Tpk - 207 Richmond, VA 23235-5247 EMAIL knowtax[at]bigfoot.com (804) 320-6210 FAX (804) 320-6211 << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#-1
04-30-2005, 10:03 PM
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| Re: Small % of S corp profit paid as wages - problematic? Lance Mannion wrote: - quote - > I noticed on a past return that I only paid 15k as a W2
Did you take non-salary distributions from the S-corp? If> wage, and 90k on Schedule E for my S corp. I know this > does not meet the "reasonableness" test. > Are my odds of audit greatly increased? > Would they just reclassify it all as wage? > What would be the penalties? not, then you likely will not have a problem, even if audited. If you did take distributions in excess of your "salary," then, upon audit, the IRS is likely to reclassify some or all of the excess as salary and assess the S-corp for FICA/Medicare plus penalty and interest. The maximumm penalty for underpaying FICA/Medicare is 100% of the tax due. I understand the IRS seldom assesses that penalty. << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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| corp, paid, problematic, profit, small, wages |
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