Below is information about PAYMENTS TO CORPORATE OFFICERS from a variety of sources. Please take a look at the materials that our team has selected for you.
https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-and-corporate-officers#:~:text=When%20corporate%20officers%20perform%20a%20service%20for%20the,receive%2C%20compensation%20are%20subject%20to%20federal%20employment%20taxes.
https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de231pc.pdf
The loan agreement was drafted by the corporate offcer and contained terms entirely favorable to him; it was an open-ended agreement providing a favorable rate of interest and payable only on demand. It was unsecured. The corporation has made no demand for payment, and the payment was listed as compensation in the corporate accounting system.
https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-and-corporate-officers
When corporate officers perform a service for the corporation and receive or are entitled to payments, those payments are considered wages. The fact that an officer is also a shareholder does not change this requirement. Such payments to the corporate officer are treated as wages.
https://www.gyf.com/2017/09/payments-corporate-officer-subject-employment-taxes/
To discuss an issue of unreasonable, excessive or under compensation, please contact Bob Grossman or Don Johnston at 412-338-9300. Tax Court Case Challenges “Reasonable Compensation” Compensation Paid to Sons of Company’s Founder was “Reasonable” Corporation’s Payment of Personal Expenses Constituted as Constructive Dividend
https://saylordotorg.github.io/text_corporate-governance/s14-09-payments-to-directors-and-offi.html
12.9 Payments to Directors and Officers Sarbanes-Oxley and subsequent SEC directives stipulate that no public company may make a personal loan to a director or officer, and existing loans may not be materially modified or renewed;
https://www.thebalancesmb.com/how-business-owners-are-paid-by-the-business-397358
Corporation and S corporate officers who are involved in the day-to-day running of a business are considered employees and they must take a salary and employment taxes must be paid on that salary. In addition, S corporation shareholders may take additional distributions of profit from the business. 2
https://www.irs.gov/charities-non-profits/exempt-organizations-compensation-of-officers
The payments issued to the officer may be made under an accountable plan or a nonaccountable plan. A plan under which an employee or volunteer is reimbursed for expenses or receives an allowance to cover expenses is an accountable plan only if: There is a business connection for the expenses;
https://rcreports.com/resources/reasonable-compensation-blog/1099-or-w-2-for-s-corp-director-fees/
Because the Director is considered as being in the “business” of being a corporate director, any ordinary, necessary, and reasonable expenses as well as the Director’s Fee income would be reported on the individual’s schedule C. This would also mean that the Director may be able to set up a retirement plan to offset some of this income.
https://www.thebalancesmb.com/what-is-a-reasonable-salary-for-an-s-corporation-officer-397939
The IRS requires that distributions and other payments by an S corporation to a corporate officer must be treated as wages "to the extent the amounts are reasonable compensation for services rendered to the corporation." This means the employee's wages must be reasonable compensation, not cash distributions, payments of personal expenses, or loans.
https://evergreensmallbusiness.com/small-business-faq/how-does-a-corporation-pay-a-shareholder/
A payment to a C corporation shareholder, if made out of the C corporation profits, is called a dividend. And draws are payments made out of capital to sole proprietors in a sole proprietorship or partners in a partnership. People use these terms rather interchangeably however. Setting S Corp Shareholder Salaries?
https://www.forbes.com/sites/anthonynitti/2016/05/13/reasonable-compensation-for-c-corporation-shareholder-employees-how-much-is-too-much/
From a tax perspective, however, the choice matters: if you take compensation, you are subject to payroll taxes at the corporate and individual level, and will pay tax on the compensation income at...
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