Need help coming up with a reasonable S corporation salary?
S corporations can save their owners enormous amounts of tax. How? By correctly setting salaries for shareholder-employees and thereby reducing payroll taxes. But the process is tricky.
Set the salary too low and you run the risk of an IRS examination. That’s bad. Really bad. In an audit, a too-low salary means not only that you will be required to pay back the S corporation tax savings you thought you were getting, but it also means you’ll be assessed severe penalties. Ouch.
Set the salary too high, however, and the situation is even worse. You may needlessly overpay your payroll taxes. And overpaying your payroll taxes could easily be a million-dollar mistake over the course of your business’s life.
Double-ouch. To help you make better decisions about setting your S corporation salary, I’ve prepared an easy-to-understand relatively short monograph, “Setting Low Salaries for S Corporations.”
Written in plain, everyday language, this $100, roughly 100 page monograph explains how to save thousands of dollars a year with your S corporation–but at the same time how you can do so ethically and responsibly and in a way that minimizes both the chance that your S corporation return will be examined and the chance your S corporation salary will be rejected by the Internal Revenue Service.
Purchase and Download
Click the button below to add Setting Low Salaries for S Corporations to the cart:
Table of Contents
Packed full of clear explanations with dozens of real-life examples, the Setting Low S Corporation Salaries monograph breaks down its subject matter into ten, easy to digest chapters:
- Chapter 1 – How S Corporations Save Payroll Taxes. A quick review of how the savings work including a subtlety most S corporation owners don’t know.
- Chapter 2 – Reviewing the Law. An explanation of the actual statute, regulation and revenue rulings that provide the loophole.
- Chapter 3 – Common Subchapter S Salary Practices. IRS data about what S corporations actually pay their shareholder-employees.
- Chapter 4 – Single Shareholder Situations. When and how a small sole proprietor can maybe make the S corporation gambit work.
- Chapter 5 – The Sec. 199A Deduction Complication. A discussion of how the Sec. 199A deduction works for an S corporation and how to resolve conflicts between the two tax laws.
- Chapter 6 – Avoiding Unreasonable Distributions. A sidebar about the importance of also thinking about shareholder distributions.
- Chapter 7 – Developing Reasonable Compensation Amounts. An eight-step work plan for setting reasonable compensation amounts for shareholder-employees.
- Chapter 8 – Practitioner Case Studies. Practical real-life examples showing how to optimize shareholder-employee salaries in common situations.
- Chapter 9 – Risky Practices and Danger Zones. Discussions of common, dangerous S corporation shareholder-employee compensation mistakes.
- Chapter 10 – Winning the “Reasonable Compensation” Argument. A step-by-step plan for winning an IRS audit of S corporation compensation.
- Appendix A – Revenue Ruling 59-221. The key primary source that opened the loophole.
- Appendix B – Revenue Ruling 74-44. The revenue ruling that the IRS uses to blow up bad S corporation salaries.
- Appendix C – Relevant Portions of H.R. 4213. The law that almost passed and which applies to single-shareholder, single-employee S corporations.
- Appendix D – Example Client Letter. A boilerplate letter accountants and attorneys can use for their own client mailings.
- Appendix E – Example Client Email. A boilerplate email.