Brokerage Firm Suggests Small Businesses Stay Vigilant with Wage Reporting

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Sunbelt Business Brokers is sending an alert to small business owners: because of substantial wage reporting discrepancies, the IRS may be hitting S corporation structures with changing tax legislation soon.

Though they serve local business sellers in Daphne, Alabama and Pensacola, Florida, Sunbelt Business Brokers acts as a mediator for business buyers nationwide. With this span of influence, the firm stays current with federal regulation changes that may affect their large dispersion of clients. After analyzing the U.S. Government Accountability Office's recent study on S corporation tax compliance, Sunbelt Business Brokers is alerting small business owners that the IRS will be cracking down on S corporations' income under-reporting this fiscal year.

Since S corporation income is only reported via individual shareholders' tax returns, the IRS is turning its attention to the untaxed corporate level for revenue renovations. If an S corporation has been underpaying shareholders, their employment taxes become an area of federal scrutiny as well, and may affect new audit protocol going forward.

Sunbelt Business Brokers also suggests that small business owners stay alert for a more stringent format of what the IRS considers a "reasonable salary." As it stands now, S corporation owners are free to define a "reasonable salary" to pay themselves for fair taxation. Whatever amount they don't pay themselves is kept corporately as undistributed earnings that are exempt from payroll, Social Security, and Medicare taxes. The GAO would like the IRS to consider new enforcement that would effectively end its lax approach to this owner-dependent fund allocation.

With regard to S corporation tax reporting, the IRS cites that the most common errors occur in expense deductions, where many businesses have been including illegitimate charges for subtraction. What is more concerning, however, is that 71% of faultily prepared tax returns are the result of professional tax consultant error. As the IRS looks into tax preparers' intentional regulation violation and accidental misunderstandings, small businesses should prepare to see new developments to improve federal compliance.

Though Congress and regulatory agencies are still formulating how to go forward in light of these GAO and IRS findings, Sunbelt Business Brokers is keeping an eye on how S corporation legislation is evolving to affect its small business clients.

About the company:
Sunbelt Business Brokers is part of the largest business brokerage network in the world. For over 16 years, they have helped consumers buy and sell in one of the nation's fastest growing regions. With offices in Daphne, AL & Pensacola FL, they serve local business sellers and national business buyers. Business Brokers South manages the entire business sales process, from helping the seller arrive at a reasonable, market-driven price for the business, to helping the buyer to arrange financing so that the seller gets the most cash at closing. For more information visit their website at

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Lanier Chew
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