Phone: 678.250.4020
Be a hero to current clients
Attract business & referrals
Minimize your liability
Reasonable compensation is the hidden tool allowing you to help clients realize benefits and avoid unseen pitfalls.
The reasonableness of shareholder compensation impacts 'C' and 'S' corp clients in different ways.
Both corporate forms have the ability to use compensation to create tax advantages for themselves, but in very different ways. S corporations attract IRS attention due to their tendency to 'undercompensate' shareholder-employees, whereas for regular corporations the concern is that they 'overcompensate' shareholders, family members or other key employees. Either way, you should address compensation to:
- Proactively defend against an IRS challenge
- Take advantage of tax planning opportunities
- Ensure needed future benefits are maximized with current, available cash flow
- Protect business valuation, especially for clients looking to sell or otherwise exit their business.
The Opportunity
Proactively advising clients about compensation creates benefits and allows you to avoid pitfalls:
- Demonstrate higher value to current clients and prospects
- Avoid potential liability issues
The Risk
Failing to address shareholder compensation can open you to liability issues:
- The IRS may assess preparer penalties
- Loss of business if current clients determine you should have advised
- Loss of reputation due to unhappy former clients
A Guide for You
As a CPA...
part of my practice is working with businesses and professionals like yourselves to address reasonable compensation issues for shareholder-employees.
Having valid compensation provides support in the areas of:
- Tax compliance
- Tax planning
- Business valuation
- Future benefits you hope to receive
My Collaboration Promise to You
1
Client Control
If we work together, understand that these are your clients. They were before the engagement and will be afterwards. You retain control over the relationship.
2
Poaching
My practice does not normally run into the area of tax preparation. I am not looking to leverage this relationship to poach your tax clients and make them my own.
3
Referrals
However, I am always looking to build new business relationships as a source to refer prospects to if I am not able to assist them. I'd look forward to working with you.
Relationships....
In today's world, the foundation of all our practices is relationships. Here are 3 common situations related to shareholder compensation that can cause friction in or even be the ruin of a client relationship.
IRS Challenge
If the IRS challenges a client's shareholder compensation and the client looses, back taxes, interest and penalties will result. THEN, they will come to YOU and ask "WHY". Why did you not advise? Why did you not act proactively to protect them in the year the compensation was paid?
Future Benefits
Many times S corporation clients are advised to take as little in salary as possible in order to save on employment taxes. Then the unthinkable happens and they become disabled. They client has to rely heavily on meager disability benefits which were tied to their salary. Was the tax savings worth it?
Business Valuation
A very common adjustment made by business valuators relates to owner compensation. Normally downward and not in favor of your client, the seller. Protect their valuation by normalizing compensation for several years before the sale or exit occurs.
How I help
My work in this area consists in providing straight-forward and accurate insights into Reasonable Compensation for closely held businesses. This helps ensure you become and remain compliant, minimize risk and realize maximum payroll tax savings.
Your Reasonable Compensation Analysis is developed with in-built industry, legal, IRS criteria and salary data intelligence. The goal is to provide credible and independent Reasonable Compensation calculations with guaranteed cover in the event of an IRS audit or litigation.
We will work together through an intuitive, cloud-based platform, removing all guesswork and providing full documentation and transparency around your specific compensation.
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