For many entrepreneurial individuals, the idea of owning their own corporation has become more of a reality thanks to streamlined business formation processes and the wide adoption of the S Corporation tax structure. In fact, the IRS estimates that there are currently more than 5 million S Corporations in the United States, eclipsing the number of C Corporations by around 300%.
The S Corporation allows its owners to enjoy the ability to take distributions and a reasonable taxed salary. The IRS will begin to increase its level of examination of Reasonably Taxed Compensation paid to S Corporation owners. Prior to 2022, the IRS selects around 1% of all S Corporations to examine for tax compliance, with many of these entities failing to ensure Reasonably Taxed Compensation is paid to its owners. Starting in 2002, the IRS will increase its level of audits, specifically focusing on Reasonably Taxed Compensation for owners of S Corporations and many will be at risk of potentially failing these audits, resulting in heavy fines & penalties.
Are you unsure if you have been taking Reasonably Taxed Compensation for your S Corporation? Don’t hesitate to reach out to us. Please give us a call Guirguis & Gibbs at (661) 209-3287. We are located at 27819 Smyth Dr. FL 2 in Valencia.