{"id":3815,"date":"2011-08-23T07:39:02","date_gmt":"2011-08-23T14:39:02","guid":{"rendered":"http:\/\/www.keytlaw.com\/azllclaw\/?p=3815"},"modified":"2018-05-22T19:06:15","modified_gmt":"2018-05-23T02:06:15","slug":"s-corporation-taxation","status":"publish","type":"post","link":"https:\/\/www.keytlaw.com\/azllclaw\/2011\/08\/s-corporation-taxation\/","title":{"rendered":"How Much Compensation must an Entity Taxed as an S Corporation Pay to Owners to Keep the IRS Happy?"},"content":{"rendered":"<p style=\"text-align: justify;\"><strong><em>The Tax Advisor<\/em><\/strong>:\u00a0 &#8220;S corporation shareholders [and owners of LLCs taxed as S corporations] generally prefer dividend distributions of their S corporations\u2019 [or LLC&#8217;s] profits over compensation payments from the S corporations [LLCs] because the compensation payments are subject to payroll taxes and dividend distributions are not. To prevent S corporations and their shareholders from avoiding payroll taxes by maximizing distributions and minimizing compensation payments, the IRS requires S corporations to pay shareholders who provide substantial services reasonable compensation. Disputes between the IRS and taxpayers have required courts to determine on a regular basis whether an S corporation has paid reasonable compensation to its shareholder(s).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Tax Advisor:\u00a0 &#8220;S corporation shareholders [and owners of LLCs taxed as S corporations] generally prefer dividend distributions of their S corporations\u2019 [or LLC&#8217;s] profits over compensation payments from the S corporations [LLCs] because the compensation payments are subject to payroll taxes and dividend distributions are not. To prevent S corporations and their shareholders from avoiding payroll taxes by maximizing distributions and minimizing compensation payments, the IRS requires S corporations to pay shareholders who provide substantial services reasonable compensation. Disputes between the IRS and taxpayers have required courts to determine on a regular basis whether an S corporation has paid reasonable compensation to its shareholder(s).<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[38],"tags":[],"class_list":["post-3815","post","type-post","status-publish","format-standard","hentry","category-tax-issues"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.7 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>How Much Compensation must an Entity Taxed as an S Corporation Pay to Owners to Keep the IRS Happy?<\/title>\n<meta name=\"description\" content=\"Two recent court cases shed light on when the IRS and the courts will consider compensation paid to owner of an entity taxed as an S corporation is 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