S Corporation Net Loss? Don’t Suffer a Surprise Salary

I sure hope your S corporation is making a nice profit and paying you a high salary.

But suppose it isn’t? Suppose your S corporation is showing a net loss for the year?

If you assume that a loss means you don’t have to pay yourself anything, you could be in big trouble.

You see, if Uncle Sam determines that your S corporation didn’t pay you “reasonable compensation,” you could be in for a surprise salary, payroll taxes, and penalties!

Want to avoid making a bad situation worse? Read my new article titled Tax Tips: S Corporation Net Loss? Don’t Suffer a Surprise Salary!

Three ways our fact-filled article can help you:

1. We’ll explain the important “reasonable compensation” rules. You probably know that there are times the law requires your S corporation to pay you reasonable compensation. What you may not know is that, when it comes to determining a reasonable salary for the owner-employee, the IRS doesn’t give a hoot about your profit/loss statement. What they do care about is when your S corporation gives you cash or property. All will be explained when you read the full article.
2. You’ll learn about the sad fate of Glass Blocks Unlimited. This case shows how the IRS and the courts view cash transfers from an S corporation to the owner. As you’ll see, a cash transfer to the owner’s corporation triggered a surprise salary (taxable wages) plus painful penalties … even though their corporation showed a loss! If you want to avoid similar nasty problems, take my advice and read the full article.
3. We’ll show you why “neither a borrower nor a lender be” can be bad advice. Here’s good news. If you loan money to your S corporation, and it subsequently repays the loans, you won’t trigger the need to pay yourself a salary. But remember, you’ll have to prove to the IRS that these were bona fide loans. You’ll get all the details when you read the full article.