Re: Sub Chap. S

"R R" wrote:

I'm a self employed insurance broker and work out of my home office (I
do get a good amount of renewals-sort of passive income)... The CPA told
me he has clients who claim 0 $ of income from their S corps and they
make 100-200k per year.

I've also read that's not a good idea as you must pay yourself a
'reasonable' salary as an advisor to the business.

Which is right?

CPA says not reporting wages from the S is not , in itself, a reason for
an IRS audit.

Your CPA is at best extremely agressive. If you follow his advice make sure
you have his written agreement to pay any penalties imposed in an audit, and
make sure he has E&O insurance. He's flat-out wrong that you won't get
audited solely because of this issue. Perhaps he hasn't heard that IRS is
getting more interested in this area as people get more absurdly agressive.

That said, my father was an insurance agent, and I can see a case to be made
for the corporation paying you much less on renewals than on new business.
My father more or less lived off renewals for about the last 10 years he was
actively in the business, and "going to work" amounted more or less getting
to the office in time for morning coffee and getting home in time for lunch
and a nap.

I wouldn't take the position that renewals yield zero payment to the
employee generating them without some case law to back it up.

--
Phil Marti
Clarksburg, MD


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