A CPA paid himself $24,000 while taking $200,000 in S-Corp distributions, lost in the Eighth Circuit, and owed six figures in back payroll taxes and penalties. Here is how the IRS evaluates reasonable compensation, the audit red flags, and a defensible methodology for setting an S-Corp owner salary.
A practical guide to how LLCs are actually taxed federally—disregarded entity, partnership, S-corp, or C-corp—when each classification makes sense, what the S-Corp election saves at $150K of profit, the 75-day Form 2553 deadline, and the six mistakes that most reliably trigger IRS audits.
Form 1120-S is the annual federal return every active S corporation must file, with a 2026 deadline of March 16. This guide covers who must file, the schedules involved, the five mistakes that cost owners the most, and a month-by-month filing workflow.
A sole proprietor netting $100,000 pays roughly $14,130 in self-employment tax that an S corp owner can legally avoid. This guide explains the break-even math, Form 2553 deadlines, reasonable compensation audit triggers, and the annual compliance costs that decide whether the switch actually saves money.
Understand the IRS requirements for S-Corp reasonable salaries and learn how to accurately track W-2 wages and owner distributions in your Beancount ledger.
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