Internal Revenue Service
Internal Revenue Service or IRS
- The Internal Revenue Service (IRS)
administers and enforces federal tax or revenue laws. It assesses and collects
federal taxes, administers federal payroll taxes, determines whether pension and
stock option plans are qualified for special tax treatment under federal tax
laws, issues federal employer identification numbers and pursues taxpayers
through audits and litigation when it believes it is entitled to more taxes than
were reported and paid. To help the government interpret and apply the IRC, the
Internal Revenue Service (IRS) issues numerous tax regulations.
Maintaining accurate and timely corporate records is crucial. During an audit, the IRS, using minutes seized from your corporate minute book, will search for discrepancies between the corporate resolutions adopted by your shareholders and Board of Directors and the actions of your corporation.
Absent proper authorization in the corporate minutes (and accurate expense records), the IRS can reclassify expense reimbursement paid to you, a shareholder-employee, as a dividend. The payment of this "dividend" to you is not deductible by your corporation and is delinquent taxable income to you on which you may owe back taxes, interest and penalties.
Absent proper authorization in the corporate minutes (and written loan agreements), the IRS can reclassify insider loan funds from a shareholder to a corporation as additional capital contribution and the loan principal repaid to the shareholder as a dividend. The payment of this "dividend" to you is not deductible by your corporation and is delinquent taxable income to you on which you may owe back taxes, interest and penalties.
Absent proper and timely authorization in the corporate minutes, the IRS can reclassify "excessive" compensation paid to shareholder-officers as dividends. - The payment of this "excessive" compensation re-characterized by the IRS as a "dividend" to you is not deductible by your corporation (the non-excessive compensation remains deductible) and is delinquent taxable income to your shareholder-officers on which they may owe back taxes, interest and penalties.
During an audit, the IRS will generally demand that you produce business records from the most recent three years or so. However, tax fraud is not subject to a statute of limitations (a limit on its power to prosecute an action because it occurred too long ago). If the IRS merely alleges that you or your corporation committed tax fraud, then it may demand your business records from ten or more years ago.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
Maintaining accurate and timely corporate records is crucial. During an audit, the IRS, using minutes seized from your corporate minute book, will search for discrepancies between the corporate resolutions adopted by your shareholders and Board of Directors and the actions of your corporation.
Absent proper authorization in the corporate minutes (and accurate expense records), the IRS can reclassify expense reimbursement paid to you, a shareholder-employee, as a dividend. The payment of this "dividend" to you is not deductible by your corporation and is delinquent taxable income to you on which you may owe back taxes, interest and penalties.
Absent proper authorization in the corporate minutes (and written loan agreements), the IRS can reclassify insider loan funds from a shareholder to a corporation as additional capital contribution and the loan principal repaid to the shareholder as a dividend. The payment of this "dividend" to you is not deductible by your corporation and is delinquent taxable income to you on which you may owe back taxes, interest and penalties.
Absent proper and timely authorization in the corporate minutes, the IRS can reclassify "excessive" compensation paid to shareholder-officers as dividends. - The payment of this "excessive" compensation re-characterized by the IRS as a "dividend" to you is not deductible by your corporation (the non-excessive compensation remains deductible) and is delinquent taxable income to your shareholder-officers on which they may owe back taxes, interest and penalties.
During an audit, the IRS will generally demand that you produce business records from the most recent three years or so. However, tax fraud is not subject to a statute of limitations (a limit on its power to prosecute an action because it occurred too long ago). If the IRS merely alleges that you or your corporation committed tax fraud, then it may demand your business records from ten or more years ago.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
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