Lance Mannion <a[at]a.net> wrote:
- quote -

A little less than that: you paid the 15.3% on the $15K you
took as salary, so it's $75K * 15.3% plus. (And around 3%
on the other $15K.)

- quote -

You _did_ file and pay, you just did them wrong.

Seth

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"Lance Mannion" wrote:

- quote -

The only penalty on this issue should be the deposit
penalty, if you'll agree with IRS to the tax. Even if 941
returns were not otherwise required to be filed and were not
thus filed, the failure to file penalties are arguable as to
reasonable cause, and the accuracy penalty will be further
stretching things on an issue like this, IMO. Nothing
stopping IRS from proposing, of course.

Fred F.

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"Harlan Lunsford" wrote:

- quote -

Some states have like even $7+ minimum wage. I read of one
place where the voice behind the drive-thru ordering station
is "outsourced." The employee is physically located across
the nearby state border where only fed minimum wage applies.
:-o

- quote -

The cases that IRS has won on this issue (virtually 100%) so
far don't get into any of that. It's theoretically a %
return on the value of the equity, which you can't prove w/o
an appraisal. So, use then a % of net book value, which is
typically how much in a small service corp? Esp if we've
179'd our equipment and stuff?

Reg,
Fred F.

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"Katie" <katiej_1958[at]yahoo.com> wrote:

- quote -

Thank You Katie.

FYI - it was *all* from my services, and was all paid in
that year. So it sounds like my risk exposure is (worst
case):

90k * 15.3% plus interest, plus accuracy penalties ?
No failure to file or failure to pay penalties ?

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Harlan Lunsford wrote:
- quote -

The starting fast food wage is more than $6 per hour around
here. The tack of lack of funds in a growing business is
more likely to pass muster. A minuscule active shareholder
salary in conjunction with large distributions of income as
dividend begins to smell.

--
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

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TaxSrv wrote:

- quote -

Surely you jest, Fred.

Mininum wage at 40 hours per week, 50 weeks a year (I'll
allow two weeks vacation!), comes out to only 10,300$. Or
do McDonald workers get overtime?

Any S corporation, like any other "regular" corporation, can
reward it's 100% shareholders, owners, founders, with an
ROI (return on investment) based on longevity and goodwill.

ChEAr$,
Harlan Lunsford, EA n LA

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- quote -

I agree an S Corp can earn profits for its investors if it
has significant non-shareholder labor or productive assets,
provided the S/Hs are properly compensated, but $15,000 for
full-time work of any kind is way low. That's just above
starting wage at a fast-food place.

Fred F.

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Lance Mannion wrote:

- quote -

Well, it depends on a lot of things. If you added some
zeroes to your numbers (e.g., $15,000 salary and $900,000
passthru), the IRS would be more interested. Also, if the
corporation earns a substantial part of its income from
something other than your services, e.g., assets it owns or
the services of employees, your salary might not be all that
unreasonable.

Worst case scenario: the whole $90,000 is recharacterized
as salary, and you owe self-employment tax on it, which is
about 15%, plus interest from the original due date of your
individual income tax return to the date of payment. And
you might have an accuracy-related penalty.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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