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Dear Client, If you are a shareholder of a Sub Chapter S-Corporation, it is important for you to be aware of a recent court case regarding the payment of reasonable compensation for active shareholders in the conduct of their business. Please read the attached article and consider how it impacts the compensation policy within your company. Based…
Watson, P.C. v. U.S., (CA8 02/21/12) 109 AFTR 2d ¶ 2012-483 The Court of Appeals for the Eighth Circuit, affirming a district court, has concluded that an S corporation shareholder-employee’s $24,000 salary in 2002 and 2003 was unreasonably low. As a result, it allowed the IRS to reclassify as salary over $67,000 in dividend payments…
Dear Client, With year end approaching I would like to remind owners of S-Corporations who own more than 2% of their outstanding stock about issues relating to medical and dental premiums that the company has paid on their behalf and a related issue of reasonable wages for a S-Corporation owner who is active in the…