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document IRS Revenue Rulings and Fact Sheet
By Jason Watson (Google+) Posted July 23, 2017 In 1959, IRS Revenue Ruling 59-221 held that amounts of S corporation undistributed taxable income which are required to be included in each shareholder’s gross income do not constitute net earnings from self-employment to shareholders. However,...
23 Jul, 2017 Views: 0 Comments: 0
document Reasonable S Corp Salary Theory
By Jason Watson (Google+) Posted July 23, 2017 Determining a reasonable salary is the hardest part of running an S corporation. What the heck do I pay myself? Before we get into that, let’s discuss why shareholder salary needs to be just above bar napkin quality and just below NASA precision. ...
23 Jul, 2017 Views: 0 Comments: 0
document S Corp Grind, Operational Hassles
By Jason Watson (Google+) Posted July 20, 2017 You’re probably thinking that running an S-Corp adds all kinds of burdens. Not true. When we ask the appropriate questions and recommend an S Corp election, some clients will say, “Sounds like a lot of work.” There are very few additional...
23 Jul, 2017 Views: 0 Comments: 0
document Reasonable Salary Recap
By Jason Watson (Google+) Posted July 23, 2017 Keeping your salary low is what drives the savings in an S corporation. Recall that $10,000 in salary costs you about $1,410 in payroll taxes. However, through the IRS Fact Sheet and several tax court cases, the assignment of reasonable shareholder...
23 Jul, 2017 Views: 0 Comments: 0
document S Corp Salary Starting Point
By Jason Watson (Google+) Posted July 23, 2017 Great. We’ve gone over the IRS Fact Sheet 2008-25, tax court test criteria and various other things. The problem is that it’s all qualitative- warm and fuzzy stuff about plusses and minuses. Where do we start quantitatively? At the end of the...
23 Jul, 2017 Views: 0 Comments: 0
document Reasonable Salary Labor Data
By Jason Watson (Google+) Posted July 23, 2017 The tax court and the IRS will attempt to support a reasonable salary based on your peers and colleagues. They will use an expert who specializes in vocational valuations, and this person might use Risk Management Association (RMA) and Bureau of...
23 Jul, 2017 Views: 0 Comments: 0
document Tax Court Cases for Reasonable Salary
By Jason Watson (Google+) Posted July 23, 2017 The tax court has provided some guidance over the years in several well-known cases. Here is a quick reference list, and later we’ll dive into the finer details- Ulrich v. United States, 692 F. Supp. 1053 (D. Minn., 1988) Sole shareholder of an...
23 Jul, 2017 Views: 0 Comments: 0
document Other W-2 Income
By Jason Watson (Google+) Posted July 11, 2017 You might not reap all the benefits of an S Corp election and subsequent self-employment tax savings if you have other W-2 income. Let’s say you are an IT consultant for ABC Company, and you also do some outside consulting. If ABC Company pays you...
20 Jul, 2017 Views: 0 Comments: 0
document Terminating S-Corp Election
By Jason Watson (Google+) Posted July 12, 2017 S Corps have relished being the class favorite for all kinds of reasons as stated in this book. However, the original C-Corp could be making a comeback. Based on projected trends corporate tax rates may be on the decline. At the same time,...
12 Jul, 2017 Views: 0 Comments: 0
document S Corp Equity Section
By Jason Watson (Google+) Posted July 12, 2017 Massaging of the equity section of your balance sheet is required when being taxed as an S corporation. Here is some nauseating accountant jargon. On January 1st, the effective date of the S corporation election, the equity section would have five...
12 Jul, 2017 Views: 0 Comments: 0