© 2015 American Institute of CPAs - All Rights Reserved. Reprinted with permission from the June 2015 issue of Journal of Accountancy. Find out what entries on Form 1120S may trigger these audits. By Stephen D. Kirkland, CPA, CMC, CFF Since compensation is subject to employment taxes (including Federal Insurance Contributions Act taxes) and distributions…
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Paying for Personal Guaranties of Company Debts
By Stephen D. Kirkland, CPA, CMC, CFF Originally published in The Tax Adviser, September 2022. Copyright: AICPA. EXPENSES & DEDUCTIONS It is common for business owners to personally guarantee company debts. This is a valuable service since many private companies could not otherwise obtain financing in the current lending market. Indeed, business owners already face…
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Contingent Compensation
Contingent compensation may be a discretionary bonus or an amount to be determined by a written formula. Either way, it should meet the same standards of reasonableness and compensatory intent as traditional salary compensation. To determine whether the amount is reasonable, carefully consider the facts and circumstances which existed at the time the bonus was…
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Which Types of Compensation are Considered?
The reference in Internal Revenue Code § 162(a)(1) to “other compensation” includes all current and deferred compensation. Deferred compensation includes employer contributions to qualified retirement plans and non-qualified deferred compensation arrangements. The current value of any equity-based compensation, such as stock options, is also considered. The costs of welfare benefits and fringe benefits are also…
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