...and Hogs get Slaughtered

Most S Corporation owners (with their tax advisors assistance) follow the simple rule of paying their owner a salary when there are operating profits inside their S Corporations.  Especially when they know the IRS has audit tools to ferret out such non-compliance.  We assist the owner in ascertaining the proper level of salary based upon various factors because we know the IRS is looking over our shoulder.  This is a short, but not too difficult a process.  But apparently, U.S. Treasury inspectors have uncovered massive non-compliance with many owners not taking a salary, and apparently no salary study being done by the owner or their tax advisors.  In fact, the inspectors study found over 75,000 firms taking NO salary when their profits exceeded $50,000.  They projected that this costs the government over $15 billion per year in additional employment taxes.

What's the IRS to do?  The IRS already has a special audit unit doing something about it for a number of years now.  They're just not able to staff enough IRS auditors to audit all these firms and fix the problem one S Corporation at a time.  So the Treasury officials are recommending to Congress that they fix the problem by subjecting all ordinary operating income of S Corporations that pass through to its more than 50% owners and relatives to employment tax.  This means significantly more Social Security, Medicare, Federal and state unemployment taxes for S Corporation owners.  With Social Security having funding issues, any plan to raise the system's revenues has a reasonable chance of passing through Congress.

If only all of those little pigs would have stayed little pigs, but no they grew up and became Hogs to be slaughtered.