Business Taxation
S corporation Under-compensation
The IRS continues to attack S corporation distributions as a method of avoiding payment of employment taxes and has been successful in a recent case. The IRS succeeded in reclassifying distributions as salary resulting in underpayment by the corporation of employment taxes. See Watson, P.C. v U.S. 109 AFTR 2d. © 2012 Parsonage Vandenack… Read More »
LLC Owned by Married Couple Generally Not Treated as Disregarded Entity
If an LLC is owned solely by a married couple who file their taxes jointly, the question may arise whether the husband and wife can be counted as one member allowing the company to be treated as a disregarded entity? This would be beneficial because it would eliminate the need for separate federal and state… Read More »
What is a Disregarded Entity?
If you have formed a limited liability company (“LLC”) by yourself, you may have heard it referred to as a “disregarded entity.” A disregarded entity is the default tax classification for a single-member LLC. Disregarded entities are generally treated as nonexistent for tax purposes. That is, all income, deductions, gains, losses, and credits are… Read More »
Benefits of Making an S Corporation Election
In an S Corporation, all income and losses are divided and passed through to its shareholders. The shareholders then report the income or loss of the corporation on their own individual income tax returns. A corporation can elect to be treated as an S Corporation by filing Form 2553. Eligibility restrictions to make the election… Read More »
