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:

Child Development Myth

Misconceptions or false beliefs about the processes through which children grow and develop psychologically, physically, and socially.

Overstimulated Babies

Infants who experience excessive sensory input from their environment, leading to signs of distress, such as crying, fussiness, or difficulty sleeping.

Social Interaction

The process by which individuals act and react in relation to others in a social context.

Mead

A fermented beverage made from honey, water, and sometimes fruits, grains, spices, or hops.