{"id":2891,"date":"2009-11-10T13:57:44","date_gmt":"2009-11-10T21:57:44","guid":{"rendered":"http:\/\/blog.huddlestontaxcpas.com\/CPA%20Article\/s-corporation-officers-and-wages\/"},"modified":"2009-11-10T13:57:44","modified_gmt":"2009-11-10T21:57:44","slug":"s-corporation-officers-and-wages","status":"publish","type":"post","link":"https:\/\/huddlestontaxcpas.com\/blog\/s-corporation-officers-and-wages\/","title":{"rendered":"S Corporation Officers and Wages"},"content":{"rendered":"

When an officer of an S Corporation performs services for the corporation and are entitled to receive payment for those services then their compensation should generally be considered wages.\u00a0 Under the Internal Revenue Code, corporate officers are specifically included in the definition of an employee for federal tax purposes.\u00a0 Because of this, when an S Corporation officer receives these payments for services, they should be treated as wages and not distributions of cash, property, or as loans to shareholder.<\/font><\/p>\n

\u00a0<\/p>\n

<\/font>The IRS wants to make sure that officers of S Corporations are not avoiding paying employment taxes on officer compensation by treating it as a distribution or loan rather than as wages.\u00a0 Courts have repeating found that S Corporation officers who provide more than minor services to the corporation and receive payments need to be treated as employees whose wages are subject to federal employment taxes.\u00a0 There is a exception to this provided by the Treasury Regulations for officers who do not perform any services or provide only minor services that do not entitle him or her to compensation.\u00a0 These officers should not be considered employees.<\/font><\/p>\n

\u00a0<\/p>\n

<\/font>The IRS requires that S Corporation officers that should be treated as employees take a \u201creasonable salary\u201d each year for their services.\u00a0 There is not guidance in Codes or Regulations that say what a \u201creasonable salary\u201d is and the courts have ruled that it depends on the facts and circumstances of each case.\u00a0 <\/font><\/font><\/p>\n

\u00a0<\/p>\n

<\/font>The following are some of the factors that have been considered by the courts in determining a \u201creasonable salary\u201d:<\/font><\/p>\n

\u00a0<\/p>\n

<\/font>-Experience<\/font><\/p>\n

-Responsibilities<\/font><\/p>\n

-Time devoted to the business<\/font><\/p>\n

-Wages paid to non-shareholder employees<\/font><\/p>\n

-Wages paid by comparable businesses for similar services<\/font><\/p>\n

\u00a0<\/p>\n

<\/font>If you need help determining what a reasonable salary is for your business it is best to consult your tax advisor.<\/font><\/p>\n

<\/font><\/p>\n

Jessica Chisholm, CPA<\/a>
\nSeattle\/Bellevue Tax Accountants<\/a><\/div>\n

<\/font><\/font><\/font><\/font><\/font><\/font><\/font><\/font><\/font><\/font><\/font><\/font><\/p>\n","protected":false},"excerpt":{"rendered":"

When an officer of an S Corporation performs services for the corporation and are entitled to receive payment for those services then their compensation should generally be considered wages.\u00a0 Under the Internal Revenue Code, corporate officers are specifically included in the definition of an employee for federal tax purposes.\u00a0 Because of this, when an S […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[19],"tags":[],"class_list":{"0":"post-2891","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-small-business","7":"entry"},"_links":{"self":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts\/2891","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/comments?post=2891"}],"version-history":[{"count":0,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/posts\/2891\/revisions"}],"wp:attachment":[{"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/media?parent=2891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/categories?post=2891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/huddlestontaxcpas.com\/wp-json\/wp\/v2\/tags?post=2891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}