Are You a Working Shareholder in an S-Corporation? If so, you may not be aware of the IRS’s “reasonable compensation” requirements, which can influence your Section 199A (qualified business income) deduction and your payroll taxes. Some factors in determining reasonable compensation include:
Training and experience
Duties and responsibilities
Time and effort devoted to the business
Dividend history
Payments to non-shareholder employees
Timing and manner of paying bonuses to key people
What comparable businesses pay for similar services
Compensation agreements
The use of a formula to determine compensation
Reviewing the requirements as they apply to your particular circumstances may avoid future problems with the IRS.
Please contact us if you have questions about these requirements and how to structure your compensation.
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