2008 IRS Hot Topics to watch for
Michael E. Steuer, CPA, P.A.
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The IRS is closly examining S Corporations and wages paid to officers who work at the business.
In many cases, the officer's wages are not to the level that would be paid to another person to perform these dutes.
By paying low wages, draws/distributions taken out of the business could be reclassified as compensation causing substantial penalties, interest, and tax filing adjustments.
Recommendation:
We recommend that all S Corporation owners closely review their salaries to determine if their compensation is reasonable.
S Corporation Officer Compensation
Every year new technology makes working at home more feasible. The rising costs of commuting make it economical and the convenience factor makes it ever more attractive. As many as 51 million workers are likely to telecommute by 2008 — about 14 million of them working from home full-time. Both self-employed and employee taxpayers may qualify for home office tax deductions, but the additional requirements for employees often are difficult to meet. Taxpayers and their CPAs need to be familiar with the requirements to maximize deductions and lower tax liability.
Home Office Deduction:
Criteria for Deduction
Deductions for office-in-home expenses are available for qualified taxpayers, both self-employed and employees. To qualify for office-in-home deductions, taxpayers must meet the criteria provided by IRC section 280A. They must use part of the home
Exclusively and regularly as the principal place of business.
Exclusively and regularly as a place to meet or deal with patients, clients or customers in the normal course of the trade or business.
In the case of a separate structure that is not attached to the home, in connection with the trade or business.
Additional tests must be met if the taxpayer is an employee. In that case the office must be for the convenience of the employer and not for the convenience of the taxpayer. This is the most difficult rule to overcome. The taxpayer also must not rent to the employer any part of the home that he or she uses to perform services as an employee of that employer.
