Attention Corporation Owners! Document Your Advances
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Going through an IRS audit is never enjoyable. Any compliance issue could potentially result in penalties. One area you should pay particular attention to is advances between you and your S or C corporation. The IRS has the authority to re-characterize these advances as taxable dividends or wages, which can lead to high tax bills. For example, Nariman Teymourian, former CEO of Hypergrid Inc, went to court over a $600,000 balance to the IRS over this exact scenario. He was able to win the case and did not have to pay additional taxes, but the process was exhausting and frustrating. In order to avoid this, an annual review with your CPA to examine or assess your compliance risks prior to the end of the year is vital. If you need additional guidance, reach out to us at XQ CPA. We are here to help!