The IRS turns a skeptical eye toward what it deems "unreasonable compensation" paid to C corp owner-executives. The taxman can decide your salary is too large and label part of it as a nondeductible dividend.
The IRS last month announced a "corporate auditing initiative" to scrutinize executive compensation packages. Reason: It pointed to recent accounting scandals and stats showing that CEO salaries jumped 442 percent in the past 20 years.
The crackdown, aimed at mid-to-large size companies, focuses on deferred compensation, stock-based pay, split-dollar life insurance,
Free E-visory: Research Recommendations subscribers can obtain a free, three-page report on ways to avoid such IRS scrutiny, Justify Compensation Write-Offs: 6 Wise Moves, at www.research-recs.com/extra.
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