Strategy No. 1-Are you an S corporation? Be careful. The IRS is on the warpath. Why? Because many S corporation owners take small, or sometimes no salaries to avoid paying payroll taxes. Instead, they take dividends, which are not subject to payroll taxes. The IRS can catch you in two ways: an audit, or just by looking at your S corporation tax return and seeing a small "officers salary" on page 1 of your corporate return. What to do? Get the salary up to a reasonable amount-what you would pay someone else to do what you do. If you render little or no services to your S corporation, a small salary is okay, but make sure to give an officer title to your key people who run the business, so that their salaries show up as officers salary on the S tax return. If the IRS nails you, it will treat your hoped-for payroll-tax-free dividends as salary. Then you will be hung for the unpaid payroll taxes, plus interest and probably penalties.
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