The Treasury Inspector General for Tax Administration (the IRS’ auditor-TIGTA) has reviewed the handling of S corporations not paying salaries to officers and avoiding employment taxes.
TIGTA’s analysis of all S corporation returns received between Processing Years 2016 through 2018 identified 266,095 returns with profits greater than $100,000, a single shareholder, and no officer’s compensation claimed that were not selected for a field examination. The analysis found that the single-shareholder owners had profits of $108 billion and took $69 billion in the form of a distribution, without reporting they received officer’s compensation for which they would have to pay Social Security and Medicare tax. TIGTA estimated 266,095 returns may not have reported nearly $25 billion in compensation and may have avoided paying approximately $3.3 billion in Federal Insurance Contributions Act tax.
SO, more S corporation audits on salaries may be on the way
For more info, see https://www.treasury.gov/tigta/auditreports/2021reports/202130042fr.pdf
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