S-corporation reasonable compensation is one of the most misunderstood concepts in tax law. And that's saying something, considering how mind-numbing U.S. tax laws are.
I’m encountering more and more sole proprietors who want to form S-corps so they can save on taxes. It’s a good strategy -- if you know what you’re getting into. The problem I encounter with these clients is: almost all of them engage in mystical thinking about the wonders of S-corps.
In the tax world, the topic of S-corporations and the salary that needs drawn by the owner(s) of the S-corp is like the wild west. S-corps can be great for self-employed people to save on self-employment taxes. But too many business owners -- and their accountants -- treat S-corps like a magic wand that can just [...]