A Timely Reminder To Pay Reasonable Compensation
Last week, another Tax Court opinion came out slapping down an S corporation shareholder-employee for not taking out reasonable compensation. As in all of these cases, the taxpayer’s motive in Sean McAlary Ltd, Inc. v. Commissioner, T.C. Summ. Op. 2013-62, is pretty obvious: the S corporation’s income after deducting salary expenses is passed through to the shareholder and taxed as ordinary income. However, the amount paid out as salary is subject to payroll taxes, in addition to being taxed as ordinary income at the shareholder level. Where there is only one shareholder, there is...
August 19, 2013 read more
NEWT Act Reintroduced
For those who keep up with the net investment income tax (NIIT) and the S-corporation planning touted by many practitioners as a solution for minimizing both NIIT and employment tax, here is a fresh news to keep in mind. The Narrowing Exceptions for Withholding Taxes Act of 2013, or so called NEWT Act (purportedly named after former House Speaker Newt Gingrich) was reintroduced in the House this January 22 by Charles Rangel. This Bill is not new. It was also introduced in the 112th Congress and even prior to that with the American Jobs and Closing Tax Loopholes Act of 2010 (Sec. 413 of...
February 01, 2013 read more