The IRS requires you to pay yourself a reasonable salary before taking distributions. Failing to meet this requirement—or setting your salary too low—can lead to audits, penalties, back taxes, and even the loss of your S-Corp status.
I have spun up a few S-Corporations in my time, and I have killed a few. Some clients hear about S-Corps on TikTok and contrive the most complicated setups possible to ultimately pay more in taxes. For others, the S election makes a lot of sense; but they need to understand the consequences.
If your business routinely provides food at meetings, make sure you’re documenting the purpose of the meeting, attendees, and how the food supports business activities.
If you’re unsure whether your business should be reporting COGS, the key question is whether you’re selling a tangible product. If you’re only using materials and supplies as part of providing a service, those costs belong elsewhere on your tax return.
Bennett Accounting & Tax LLC is a first-rate remote Certified Public Accounting firm. Whether it’s bookkeeping, payroll, or taxes — we’ve got you covered.
