{"id":232,"date":"2008-11-24T13:48:32","date_gmt":"2008-11-24T17:48:32","guid":{"rendered":"https:\/\/old.visionpayroll.com\/kb\/?p=232"},"modified":"2008-11-24T13:51:28","modified_gmt":"2008-11-24T17:51:28","slug":"irs-issues-fact-sheet-on-s-corporation-officer-compensation","status":"publish","type":"post","link":"https:\/\/old.visionpayroll.com\/kb\/2008\/11\/irs-issues-fact-sheet-on-s-corporation-officer-compensation\/","title":{"rendered":"IRS Issues Fact Sheet on S Corporation Officer Compensation"},"content":{"rendered":"<p class=\"MsoNormal\" style=\"margin: 0in 0in 6pt;\"><span style=\"font-size: 10pt; font-family: Verdana;\">The Internal Revenue Service (IRS) recently issued <a href=\"http:\/\/www.irs.gov\/newsroom\/article\/0,,id=200293,00.html\" target=\"_blank\">Fact Sheet FS-2008-25<\/a>, which discusses S corporation officer compensation. Corporate officers, whether in S corporations or C corporations, are generally considered employees of the corporation. Officers who perform only minor services or no services and are not entitled to and do not receive compensation are not considered employees.<\/span><\/p>\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 6pt;\"><span style=\"font-size: 10pt; font-family: Verdana;\">As an employee, officers who are also shareholders must receive a reasonable salary to the extent that distributions or other payments are made to the officer-shareholder. Factors considered when determining when compensation was reasonable have included the following:<\/span><\/p>\n<ul style=\"margin-top: 0in;\" type=\"disc\">\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Training and experience<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Duties and responsibilities<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Time and effort devoted to the business<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Dividend history<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Payments to non-shareholder employees<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Timing and manner of paying bonuses to key people<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">What comparable businesses pay for similar services<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Compensation agreements<\/span><\/li>\n<li class=\"MsoNormal\" style=\"margin: 0in 0in 6pt; mso-list: l0 level1 lfo1; tab-stops: list .5in;\"><span style=\"font-size: 10pt; font-family: Verdana;\">The use of a formula to determine compensation<\/span><\/li>\n<\/ul>\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 6pt;\"><span style=\"font-size: 10pt; font-family: Verdana;\">The S corporation should deduct as fringe benefits any health and accident insurance premiums paid for so-called \u201c2% shareholders\u201d. The amount of the premiums is taxable to these shareholders for income tax purposes, but not for FICA or FUTA.<\/span><\/p>\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 6pt;\"><span style=\"font-size: 10pt; font-family: Verdana;\">Pursuant to IRS Notice 2008-1, a medical plan is \u201cestablished by the S corporation\u201d even if the plan is in the name of the shareholder as long as the S corporation pays the premium or reimburses the shareholder for the premium payment.<\/span><\/p>\n<p><span style=\"font-size: 10pt; font-family: Verdana; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;\">Box<\/span><span style=\"font-size: 10pt; font-family: Verdana; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;\"> 14<\/span><span style=\"font-size: 10pt; font-family: Verdana; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;\"> on the Form W-2 may be used to provide the shareholder with the amount of the premiums paid, but the income should\u00a0only be reported on Form W-2 and not\u00a0on either Form 1099 or Schedule K-1. Contact <a href=\"mailto:info@visionpayroll.com\" target=\"_blank\">Vision Payroll<\/a> if you have any questions on <a href=\"http:\/\/www.irs.gov\/newsroom\/article\/0,,id=200293,00.html\" target=\"_blank\">Fact Sheet FS-2008-25<\/a>.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Internal Revenue Service (IRS) recently issued Fact Sheet FS-2008-25, which discusses S corporation officer compensation. Corporate officers, whether in S corporations or C corporations, are generally considered employees of the corporation. Officers who perform only minor services or no services and are not entitled to and do not receive compensation are not considered employees. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[565,566,563,73,564,74,567,321,14,177,562,99],"_links":{"self":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/posts\/232"}],"collection":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/comments?post=232"}],"version-history":[{"count":0,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/posts\/232\/revisions"}],"wp:attachment":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/media?parent=232"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/categories?post=232"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/tags?post=232"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}