S Corporation & Individual Tax Return Notes




Shareholder basis in S corporations is a big IRS enforcement priority. Owners of S corporations can deduct losses only up to their stock basis and loan basis on loans that the shareholders make directly to the company. The IRS knows that compliance in this area is deficient and is conducting audits. Exams are at the shareholder level. Agents are checking to see whether shareholders are properly tracking their basis.


Currently, S corporation shareholders who report a loss or receive a distribution or loan payment from the company must include basis information with their individual income tax returns. The IRS is proposing a new tax form for shareholders to report their stock and debt basis. The new form will likely bring increased scrutiny to basis issues.


Officer Salaries

The Treasury is pressuring the IRS to target S corporations that pay low salaries to owners. S corporations with active shareholders who take no salary will become an automatic audit candidate.


As we previously reported, the IRS wants more individual taxpayers to get identity protections PINs as extra protections against identity theft. The IP PIN is a six-digit number assigned by the IRS annually to help verify a taxpayer’s identity. You may apply for an IP PIN by going to www.irs.gov/IPPIN , select “Get an IP PIN,” then verify your identity.