A tax warning to S corps

Written by Reed Tinsley | December 30, 2008

 

IRS audits now routinely review S corporation payments to shareholders to see if payroll taxes are being avoided by treating payments to shareholder-officers as loans or shareholder distributions of cash or property. A physician officer performing services for a corporation is entitled to payment; those payments are wages. For federal employment tax purposes, corporate officers are employees.

Avoiding employment taxes by treating compensation as cash distributions, expense reimbursements, or loans rather than as wages will get you in hot water. For clear details on the rules, go to the IRS Web site (www.irs.gov) and type in the Search Box, “FS-2008-25.” [Fact Sheet 2008-25]

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.

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