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S corp liable for paying low salary to sole shareholder

by on
in Small Business Tax Deduction Strategies

In a fight over whether payments from an S corporation to its sole shareholder are dividends or salary, the IRS has the final word. Now a federal trial court has ruled that the IRS had authority to recharacterize non-FICA-taxable dividends distributions from an S corp to its sole shareholder as FICA-taxable wages.

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