After finding out some of the excess spending the IRS has been doing, I am not really surprised someone has decided to try to reign them in. See this article in AccountingToday by Richard Rubin:http://www.accountingtoday.com/news/Republicans-Propose-Cutting-IRS-Budget-Limiting-Videos-Bonus-67366-1.html?ET=webcpa:e7369:204199a:&st=emailMaybe the IRS will think twice about some of their spending choices if this is enacted. For financial, accounting and tax musings,You can count on us to count for you! email bstonercpa@sbcglobal.net phone 818-317-6035 Website www.briantstonercpa.com
How Can You Deduct Shareholder Health Insurance in an S Corporation?
In 2008, the IRS provided guidance on how to deduct Shareholder Health Insurance on an S Corporation. The only way to deduct this is to treat the insurance as salary (not subject to payroll tax withholdings) and put this on the shareholder’s W2. Then the insurance can be deducted on the taxpayer’s individual tax return as self employed health insurance. You need to stick to this procedure to be able to deduct the insurance, otherwise the IRS will disallow! Feel free to call or email with questions.For financial, accounting and tax musings,You can count on us to count for you! email bstonercpa@sbcglobal.net phone 818-317-6035 Website www.briantstonercpa.com
What is Reasonable Compensation for an S Corporation?
According to the IRS website, reasonable compensation in relation to S Corporations is as follows:“Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation. S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee. The amount of reasonable compensation will never exceed the amount received by the shareholder either directly or indirectly.”What does this mean? Calculations of reasonable compensation can include all services that the shareholder employee provides. If they answer the phone, if they file, if they do other services, this can be used to calculate shareholder compensation. Court cases have used a calculation similar to this, and a Public Accounting company had less than 50% of the net income of the company required to be paid as reasonable compensation. This is an area that calculations can bring in a lower reasonable compensation than people think. There are software packages that can calculate this compensation to minimize it. This is an area that should be explored to potentially save payroll [...]