Question

The IRS has been challenging owners of S-Corps over the issue of salaries that are paid and the corresponding employment taxes. What are some strategies to mitigate these issues? Read the Glass Blocks Unlimited v Commissioner of Internal Revenue article and support your answer with specific examples and research.

In response to your peers, compare your findings to your peers’ ideas and discuss any differences.

Answer 1

The issues of salaries paid and corresponding employment taxes of S-Corps.

Explanation:

S-Corps are forms of corporations that are not taxed in the United States but their revenues are taxed on the amounts paid to employees or owners as salaries. The S-Corps do not pay any taxes to the revenue authorities.

In a previous research done by Stephen Fishman, it was discovered that more than 440,000 single shareholder S-Corps did not pay salary to the owners leading the the federal government missing on billions of money lost in way of avoiding the payment of taxes (Plečnik, 2017).

The strategies to mitigate this issue is through the imposing of a tax on the income earned by S-Corps to help curb and prevent the avoidance or tax evasion by the corporations where they fail to make payroll payments that lead to lack of the incomes earned from being taxed.