accounting services

How S Corporations Can Avoid Unreasonable Compensation Audits

A recent article by Stephen D. Kirkland published in the Journal of Accountancy, discusses the red flags the IRS looks for when identifying compensation audits for S Corporations (S-Corps). The biggest red flag the IRS identifies is insufficient compensation paid to shareholders. While many S-Corps reduce compensation and increase distributions for tax reasons, this is one of the most prevalent reasons for an IRS examination. The tax rules that apply to compensation of shareholders and officers for S-Corps is not simple, but these nine items can go a long way toward helping S-Corps file returns that achieve the best results:

  1. Identify the officers
  2. Find the correct business activity code
  3. Confirm percentage of time devoted to business
  4. Be consistent
  5. Encourage each shareholder who works for the company to take reasonable compensation
  6. Encourage shareholders to maintain written logs
  7. Explain the rules to clients
  8. Provide comparability data
  9. Encourage shareholders to minimize loans from the company

For more information on S-Corps and compensation audits, please visit the referenced article by Stephen D. Kirkland in the Journal of Accountancy, or contact Terry Maycroft at tmaycroft@brickleydelong.com or (231) 726-5825.

Accounting Services

Tips for a Faster Month-end Close

In a recent article posted on the AICPA website, Maria Murphy offers tips for a better and faster month-end close. A few questions she addresses to help consider if your close cycle needs to be quicker are:

  • Is anyone complaining about the length of the monthly close?
  • Who will benefit from a quicker close?
  • Can the close go faster without sacrificing accuracy?
  • Is there specific information that can be disseminated before the close is finalized?
  • Can nonfinancial data, such as human resources or production data, be used to close more quickly?

The tips Murphy offers for a shortened close are:

  • Break the close process into pieces
  • Perform a risk analysis
  • Change mindsets from looking backward to looking forward
  • Evaluate close areas that can be done in different time periods
  • Use technology
  • Communicate

At Brickley DeLong, we assist many clients with the monthly, quarterly, and annual period-end financial closings. We pride ourselves in being dependable when it comes to preparing your tax returns and other required filings. For more information on our accounting services, click here, or contact Brian McFarren at (231) 726-5815 or bmcfarren@brickleydelong.com.


Brickley DeLong is a West Michigan Accounting Firm, offering personalized accounting services with offices in Muskegon, Hart, and Grand Rapids, Michigan.