A Longstanding Focus of the IRS When Examining a Return

question 49

Essay

A longstanding focus of the IRS when examining a return of an S corporation is whether reasonable compensation was paid to the S corporation shareholders who work for the corporation. S corporations and their shareholders are inclined to pay too little of compensation in order to reduce payroll taxes. Why might the auditors of a state tax agency be more concerned that an S corporation paid too much compensation to the shareholders?

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Definitions:

Dietary Supplements

Products taken orally that contain dietary ingredients intended to supplement the diet, such as vitamins, minerals, herbs, amino acids, and enzymes.

Herbal Products

Natural products derived from plants that are used for medicinal, culinary, or cosmetic purposes, often perceived as natural alternatives to synthetic medications.

Holistic Healthcare

An approach to treatment that addresses the individual's physical, mental, and spiritual well-being, rather than focusing solely on physical symptoms.

Personal Growth

The process of improving self-awareness, knowledge, personal skills, and overall potential to enhance the quality of life.