IRS Goes After Executive Whose Pay Is Too Low

Targeting executives who pay themselves too little in order to shield some of the money they make from taxes, the IRS is focusing its sunshine-concentrating magnifying glass on potential offenders.

The Wall Street Journal reports the IRS successfully sued an Iowa CPA who classified his business as a “Sub-S” corporation, meaning he was the sole owner and shareholder in the company. The CPA reported that in years his Sub-S was part of a firm that made six-figure profits, his annual salary was only $24,000. The low salary saved the accountant $20,000 in payroll taxes, triggering the IRS to cry fowl. District court ruled the CPA had to pay back taxes plus interest and penalties.

The story says there are 4 million Sub-S corporations in the country. And any of those owned by people whom the IRS may deem paid themselves too little will take a collective gulp right about now.

The IRS Targets Income Tricks [The Wall Street Journal via Slashdot]