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When 199A and Reasonable Compensation Collide – (WEA)

When 199A and Reasonable Compensation Collide
IRS Program #: X9QQU-T-00817-21-S
CE: 2
Speaker: R. Kevin Cross, MST, EA, CPA

What does the qualified business deduction (QBI - IRC 199A) have to do with reasonable compensation at the low end for small S corporations? More than meets the eye.


We will focus on Code Section 199A specifically how it relates to the sweet spot in garnering the maximum qualified business deduction of 20%. This number is impacted by salary and profit. However we will also delve into whether this code section is diamond to be mined and if this now has created now new statutory guidance for the EA to assists their clients in the area of reasonable compensation?

Learning Objectives:

  • We will review the basics of the ratios between salary and net profit
  • We will calculate the sweet spot to receive the max benefit under the Code
  • Upon review of the QBI “sweet spot” we will see what it reveals statutorily when determining salary for the small S Corp owner
  • We will cover the cases that we have always “hung our hats upon” such as Radtke v. US, and our dear friend Watson (David E Watson v. US)
  • We will discuss the possibility of the crumbling of the “Ostrovsky Doctrine” in Watson v Commissioner, 668 F.3d 1008 (2012) where a CPA comrad was decided he did not pay himself reasonable compensation and was taken to the proverbial “Gorky Park” by the IRS general engineer Igor Ostrovsky
  • We will stand or sit in amazement that an IRC Section that may speak to reasonable compensation for the very first time through Code Section 199A
 
Continuing Education
This course qualifies for IRS Continuing Education Hours. NAEA reports IRS CE on a monthly basis. If you have not received your CE Hours in your IRS PTIN Account by the end of the month after receiving the certificate, please contact NAEA at education@naea.org.

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