Reasonable Compensation Horror Stories

Few tax topics cause as much confusion, or as much damage, as reasonable compensation. For practitioners who advise S Corps, the stakes reach past the client’s return. The IRS expects S Corp owners to pay themselves a defensible wage, supported by unbiased data and documented each year. When that documentation is missing, clients face back taxes, penalties, and interest, and the preparer who signed the return faces penalties of their own.

In this one-hour session, Paul S. Hamann of RCReports and a panel of practitioners examine recent reasonable compensation audits in detail. They show where documentation held up, where it fell apart, and how the practitioners involved handled the examination. Justin Elanjian, CPA, Tax Managing Director at Frost Law, moderates.

What you will learn

• What reasonable compensation is, and what it is not
• Why documentation from a reliable, unbiased source matters when defending against current audit challenges
• How to discuss reasonable compensation rules with clients, including the risks of skirting them
• The Social Security and disability consequences of setting compensation too low
• Steps that protect both you and your clients on reasonable compensation