Be Careful When Giving Yourself Bonuses
Whoa, there, big spender: Make sure your big bonus is kosher with the IRS.
When the profits are flowing in, it’s often tempting to giveyourself a nice, big bonus at the end of the quarter. But you’dbetter keep your greed at bay if you’re organized as a regularcorporation: The IRS is going after those business owners who paythemselves too much.
To decide whether compensation is reasonable, the IRS looks at anumber of factors. These include the nature and size of thebusiness, the nature and scope of the work the owner does at thecompany, the amount of time required for the services, and anyspecial qualifications the owner has. Industry surveys andthird-party studies help determine what is considered reasonablecompensation for companies in the industry.
When the profits are flowing in, it’s often tempting to giveyourself a nice, big bonus at the end of the quarter. But you’dbetter keep your greed at bay if you’re organized as a regularcorporation: The IRS is going after those business owners who paythemselves too much.
To decide whether compensation is reasonable, the IRS looks at anumber of factors. These include the nature and size of thebusiness, the nature and scope of the work the owner does at thecompany, the amount of time required for the services, and anyspecial qualifications the owner has. Industry surveys andthird-party studies help determine what is considered reasonablecompensation for companies in the industry.
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