VBJ March 2020

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THE VALLEY BUSINESS JOURNAL 12 www.TheValleyBusinessJournal.com March 2020 S-Corporation Compensation FINANCIAL Presented by Nicole Albrecht The number one audit risk that S-Corporations have to deal with is salary and wages paid to officers of there corporation. One of the fastest ways for the IRS to audit an S-Corporation is to file an 1120S tax return with no amount showing on Line 7. It is assumed by the IRS that no one works for free, and by that being said the IRS has made it clear that officers of the corporation must receive wages in a profitable enterprise. So as an owner of the corporation, you need to pay yourself a salary, pay payroll taxes on that salary that you set for yourself. The salary that you pay for yourself does not need to be high, but however it does need to be a “reasonable amount” according to the IRS. Compensation of an officer should be based on the same criteria as what you would pay someone to do the job that you do. Things that should be remembered when setting the salary is prevailing market rates, the individual’s knowledge skills, and abilities to do the job efficiently, amount of hours worked, and other factors that involves the line of work that goes with the corporation. Also, salary is reasonable if a non-officer would be willing to take a job that is set at a proposed salary level. Generally, the IRS will allow the corporation a set of standards for setting the compensation for the officers-employees. However, the salary must be paid and the level that the salary is set at must be reasonable. Zero salary is unreasonable, NO one works for free. You would not want to persuade an employee to accept a job offering below what minimum wage is. The IRS can collect payroll taxes on an officer’s compensation, and the penalty for falling to pay payroll taxes is 100% of the taxes owed by the corporation. To avoid this payroll tax penalty each officer and the employees should be paid a reasonable compensation. Financial Accounting Services not only specializes in corporation taxes but payroll as well. Give our office a call at 951- 719-1515 to book your tax appointment. “ Being a small-business owner isn’t easy. After all, balancing payroll, managing employees, drawing up marketing plans, and handling the bookkeeping can be stressful! Patrick Ellis Earns Status CONTINUED FROM PAGE 1 Murrieta/ Wildomar Chamber President/CEO, Patrick Ellis was honored at the Western Association of Chamber Executives (WACE) 2020 Annual Conference in Portland, OR as an Accredited Chamber Executive (ACE) for his work in his Chamber, community and his commitment to the Chamber of Commerce Industry. Patrick is one of 22 Chamber Executives to currently hold this distinction. ACE, a designation initiated in 1992 by WACE, serves to encourage local Chamber Executives to strive for professionalism and seek formalized training in their field and contribute actively to the betterment of their industry. The ACE designation is awarded only to those Chamber Executives who meet stringent criteria set by WACE. WACE is the largest state or regional association of chamber of commerce executives in the United States. Murrieta/Wildomar Chamber of Commerce has been led by Patrick Ellis since 2012 and through his leadership continues to be a Catalyst for business growth, a Convener of leaders & influencers and a Champion for a stronger community. For more information, please contact Heather Estrada, Murrieta/Wildomar Chamber Communications & Program Coordinator at 951-677-7916 or via email at heather@mwcoc.org
March 2020 THE VALLEY BUSINESS JOURNAL www.TheValleyBusinessJournal.com 13 Do I Really Want Renters Insurance? Quick take: Reasons to consider renters insurance • Renters insurance can help you repair or replace property after loss due to many types of damage or theft. • It can provide coverage for an accident on your property. • Policies have very affordable annual premiums. • Your landlord’s property insurance doesn’t cover your personal property. Q: I just got my first apartment! It’s tiny, and I don’t own a lot of things, but my parents are encouraging me to get renters insurance. Here’s my question: Since my landlord already has insurance on the property, what reason would I have to get renters insurance? A: Simply put, renters need insurance to protect their stuff. As a renter, you don’t own the structure you live in and you are not likely to insure it. The belongings inside your rental, on the other hand, are probably important to you. One reason to carry renter’s insurance is to have coverage for your belongings. For example, renters could provide coverage in the event of: • A kitchen fire. A renter’s policy could help with the costs to replace items destroyed in the fire. If your place can’t be lived in while repairs are being done, renter’s insurance may also provide coverage for a place to stay, meals and related expenses. • A burglary. Renters insurance could help with the costs to replace the covered stolen items. • A guest falls and gets hurt. The personal liability coverage included in a renter’s policy could help with the payment of medical bills or other expenses related to the accident. Before you decide that you don’t have enough stuff to get damaged in a fire or what you have is not likely to be stolen, take a look around. You might see more items that are costly to replace than you’d expect. For instance, a smartphone, designer handbag, professional chef knife set, new laptop are all commonly used, high-ticket items. How about your grandmother’s antique china? Even the cost of replacing all your clothes could put quite a dent in your savings. “What does renters insurance cover?” In general, renters insurance provides coverage for your belongings, such as clothing, household items and furniture. It also includes electronics and jewelry, although limitations may apply. A renter’s policy also typically includes: • Personal liability coverage — in case you are found legally liable for bodily injury or property damage to someone else in an accident where coverage applies. • Personal property coverage – even when you are traveling and away from home. • Additional living expenses – when you can’t stay in your rental because of a claim. Some renter’s policies will provide a replacement cost for a lost or damaged item. Other policies may provide cash value, which takes into account depreciation of your item before the payout. What’s the difference? Say you purchased a new sofa 10 years ago, the cash value that you’d receive could potentially be well under $100. But if the same couch can be bought brand-new, that dollar amount would be the replacement cost amount. “Is renter’s insurance expensive?” Not really, which is one of the best reasons to recommend renters insurance. While several variables can affect the cost of your premium, overall, renter’s insurance is a cost-effective type of coverage. In fact, according to the Insurance Information Institute, the average yearly premium for renters insurance is just under $200. Talk to your local agent to help determine how much coverage you may want based on the value of what you own. INSURANCE by by Craig Steve Davis Fillingim “ Before you decide that you don’t have enough stuff to get damaged in a fire or what you have is not likely to be stolen, take a look around.
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VBJ March 2020

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