Section 3: 10–20%T11
Owner Compensation and Fringe Benefit Planning
Exam insight
How owners are paid drives payroll tax, the QBI deduction, and the risk of IRS recharacterization, and the AICPA tests the reasonable-compensation rules for S and C corps, guaranteed payments for partners, the more-than-2 percent S corp shareholder fringe benefit rules, and accountable plans. Paying an owner the wrong way can trigger constructive dividends, payroll tax shortfalls, or lost deductions.
What AICPA wants you to know
- 1Apply the reasonable-compensation requirement for S corp shareholder-employees to plan payroll tax.
- 2Identify excessive C corp compensation that the IRS recharacterizes as a nondeductible constructive dividend.
- 3Distinguish guaranteed payments from distributive-share distributions for partners.
- 4Apply the more-than-2 percent S corp shareholder fringe benefit rules and the self-employed health insurance deduction.
- 5Explain accountable plan requirements for tax-free expense reimbursements.
- 6Describe the basics of nonqualified deferred compensation and its timing under section 409A.
Patterns in this topic
The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.
Exam tip
Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.