IRS clarifies “reasonable comp.” for S corp. owner’s 199A tax deduction

In August, the IRS released its proposed regulations governing Section 199A of the tax code.

That’s the section that created the 20-percent deduction that applies to S corporations and other pass-through entities.

I’m glad to report that the new regulations contain some very good news…

The reasonable compensation the S corporation pays its shareholder-employees are treated as wages.

Want to learn why this new clarification of the regulations are great for you? Read my new article titled Tax Tips: IRS Clarifies Reasonable Comp. for S Corp. Owner’s 199A Tax Deduction.

Three ways our fact-filled article can help you:

1. We’ll explain the importance of the new regulations. For the 199A deduction, you treat wages paid to the S corporation shareholder-employees as a wage deduction when determining the S corporation’s taxable income. That’s the starting point for calculating qualified business income. You’ll get the full implications of this when you read the full after-tax-reform article.
2. You’ll learn exactly what the IRS has to say. We’ll cite chapter and verse from the proposed regulations, including this warning: if you fail to pay a reasonable wage, the IRS will deduct what it thinks is a reasonable wage from your Section 199A qualified-business income. This will create big trouble for you as we’ll explain when you read the full after-tax-reform article.
3. We’ll explain some outstanding planning opportunities. The fact is, the S corporation wages you pay to your shareholder-employees reduce qualified-business income. And they qualify as wages for the 199A 50-percent wage deduction. We’ll show you how to turn all this to your advantage when you read the full after-tax-reform article.