Subchapter S corporations offer a number of tax advantages, but they can also lead to complications. One longstanding concern is the question of “reasonable compensation” for S corporation shareholders who are also officers or employees of the company. Several provisions in the 2017 Tax Cuts and Jobs Act (TCJA) have drawn added attention to this issue—and to the sizable penalties that companies can incur if they do not manage officer compensation properly. (more…)
Partnerships and S Corporations: IRS Clarifies Schedule K-2 and K-3 Rules
Since the IRS first introduced them for the 2021 tax year, Schedules K-2 and K-3 have caused concerns—and confusion—for many partnerships and S corporations. The purpose of the two schedules is to report information related to foreign financial activities, but some pass-through entities found themselves subject to the forms’ requirements—even though they had no foreign interests or concerns. (more…)