Shareholder Payments

IRS audits now routinely review S corp payments to shareholders to see if payroll taxes are being avoided by treating payments to shareholder-officers as loans or shareholder distributions of cash or property.

An officer performing services for a corporation is entitled to payment; those payments are wages. For federal employment tax purposes, corporate officers are employees.

Avoiding employment taxes by treating compensation as cash distributions, expense reimbursements, or loans rather than as wages is illegal.

Make sure you are paying your shareholders correctly! Get a check-up of your books.