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 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. Mispaying an owner can trigger constructive dividends, payroll tax deficiencies, or lost deductions.
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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.