Request a reasonable compensation analysis!
Are you an S-Corp shareholder and you are unsure if your salary aligns with the tasks, duties and description of your role within your corporation?
S-Corps are an incredible tool to reduce self-employment tax!
In fact, they can help to reduce your tax bill by several thousands each year. However, you want to be careful when it comes to setting your salary.
Actually, it is extremely important. Here's Why:
If your salary is too low and you get caught by the IRS, you will owe additional payroll and income tax, plus penalties, which can be very costly.
In most cases, the IRS will expand the audit to cover three years and then add the income and penalties for those previous three years.
After getting caught, you likely will be stuck with this higher salary, which defeats the original purpose of saving on self-employment taxes.
Also, your accountant can get slapped with preparer penalties.