Focus on Finances
S corps are coming under closer scrutiny. How will it affect you?
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Concerned that some owners of S corporations aren't payingtheir fair share of business taxes, the IRS has kicked off anaggressive campaign to identify potential abuses among S corps.
The IRS has recently started to examine 5,000 randomly selectedS corp returns from the 2003 and 2004 tax years. A chief concern:whether some S corp owners are skimping on their salaries--orskipping them altogether--in favor of a larger dividenddistribution, which isn't subject to self-employment taxes."Historically, that's what people have tried to do, andthat's one of the reasons the IRS is conducting theseaudits," says Deborah Schenk, Grossman Professor of Taxationat the New York University School of Law.
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