The Tax Cuts and Jobs Act: Impact on Reasonable Compensation for S Corp Shareholder-Employees
Author: Greg White
| CPE Credit: |
2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC |
What Is the Optimal Balance of Pay vs. Dividends for S Corp Employee-Shareholders?
Join experienced tax practitioner and instructor Greg White, CPA, as he presents a broad overview of the reasonable compensation rules, including up-to-the-minute changes. This two-hour CPE course will include coverage of how the Tax Cuts and Jobs Act (TCJA) affects decision-making in grey areas, and how to determine the optimum amount of compensation (within a reasonable range) for S corporation shareholder-employees. The new tax law presents opportunities and pitfalls that you clients need to be aware of.
Greg will compare S corporations vs. LLCs under the TCJA to help you optimize entity choices and tax planning. You will learn when do S corporations provide greater qualifying business income deductions (20% passthrough deduction) – and when they provide less.
Publication Date: January 2019
Designed For
CPAs, EAs, and other tax professionals and tax staff who have responsibility for filing Forms 1120S.
Topics Covered
- Reasonable compensation case law
- When to pay less compensation to increase the 20% passthrough deduction
- When to pay a shareholder employee more compensation to increase the 20% passthrough deduction
- What amount of wages optimizes the 20% passthrough deduction
- When are S corporations better choices for reducing overall taxes — and when aren't they
- What is the "cost" of paying less in payroll taxes
Learning Objectives
- Recognize how determine "reasonable compensation" for S corporation shareholders
- Identify and apply the reasonable compensation rules in specific settings
- Describe how to maximize S corporation shareholders' 20% passthrough deduction
- Identify and apply a formula to determine the optimum amount of wages to maximize the 20% passthrough deduction
- Recognize how to adjust reasonable compensation (within a reasonable range) to maximize the 20% passthrough deduction
- Identify the steps in calculating the cost of lost social security benefits
- Identify the annual social security benefit at full retirement age with averaged indexed annual earnings of less than $11,112
- Recognize characteristics of the new QBID deduction
- Identify the full phase in amount for the QBID for those individuals filing as single
- Describe a common profession/industry involved in litigation with respect to reasonable compensation
- Recognize circumstances considered with respect to reasonable compensation, based on the IRS Fact Sheet
- Describe court cases and how they apply to your clients
- Identify the threshold amount for QBID for those individuals filing as married jointly
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
Participants should have experience in federal income taxation issues including preparation of Forms 1120S.
Advance Preparation
None
