For the longest time, saving employment taxes by means of skimming cash from either a partnership or an S Corp seemed a bit like the lawless wild west with no sheriff, no posse and no hanging tree. Oh, don’t get me wrong. There were laws on the books. It’s just that the odds of getting caught were slim to none, save for the stray example IRS or an occasional court made of some renegade that got caught.
But, there’s a new sheriff in town. Charles Rettig, the newly minted IRS commissioner, is at the helm. Under his watch, IRS this spring launched a new partnership reasonable-compensation audit guide. IRS also convinced the Tax Court it does not any longer have jurisdiction to hear S Corp reasonable comp employment tax cases (8th Circuit agrees). Evidence is on the horizon IRS plans to exact a mighty pound of flesh in response.