Mark Kohler says S-corp owners often overpay taxes because accountants set payroll too high. He's never seen a client audited for taking reasonable compensation, and says owners should push back if their accountant is being overly conservative.
For any of you out there that are s corporations already or took advantage of making a retroactive s election to 1125, you got to nail your payroll. Now. This is where many, many accountants are far too conservative. Do not let your accountant freak you out and say oh my gosh, you're going to get audited if you don't take enough payroll and they take far more in FICA wages than is reasonable and you end up paying way too much in taxes. People, you were the captain of your ship. This is your tax return. So reevaluate your payroll level and if your account is too conservative, get rid of them. I'm not kidding. In 25 years, we've never had a CL client audited for taking too low and reasonable comp. We teach on this, we write on this, we read every case on this. Trust me, your accountant could be way, way too conservative.
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