“Wage” War: Round One
Posted by William Byrnes on February 24, 2011
The topic Self-Employment Tax on wages versus distributions has reared its head again – as shown by the recent Federal District Court case involving David E. Watson.
The C.P.A. recently disputed and lost to the Government’s position which recharacterized dividend and loan payments from David E. Watson, P.C. (a Subchapter S corporation) to its sole shareholder and employee, David E. Watson. The IRS assessed additional employment taxes, interest and penalties against Watson for each of tax years in which Watson’s salary was significantly lower than his total distributions.
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