Well, here is the background: he is currently a partner in an llc, but he is planning to spend significantly less time on the business in order to start another company. His current partnerwill run the day-to-day operation while he'll only be involved in big picture stuff. Since he will be clocking much fewer hours, his salary will be lower, at least relative to his profit. So he's asking if he would be able to save on self employment tax if the company converts to an s-corp. Putting aside all the additional complexities that come with s-corp, would such a conversion work to reduce his taxes?
Thanks for all your thoughts and comments.
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S-Corp Part-time salary
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Irs
The IRS may not question it even if there was almost no salary. They are always threatening to crack down on the reasonable salary issue, but I've never seen them question it on any clients of mine, some of whom have grossly underpaid themselves.
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Agree, they also would look at total hours worked and if other employees work in corporation. One of my clients worked full time in one of his corporations and only a little bit in the second one, not even $1,000/month. He had other employees who ran the corporation.
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Originally posted by minli98 View PostHi,
If an S-Corp owner works in the company part-time, and hence receiving smaller salary than what a full-time person in his capacity receives, would that trigger an IRS audit for having unreasonably low salary?
Thanks
In audit IRS would compare the actual salary to total profits to make determination of reasonable compensation.
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S-Corp Part-time salary
Hi,
If an S-Corp owner works in the company part-time, and hence receiving smaller salary than what a full-time person in his capacity receives, would that trigger an IRS audit for having unreasonably low salary?
ThanksTags: None
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