Don Farmer's Top 10 S Corporation Return Issues & How to Avoid Them

Overview

S corporation tax returns present recurring technical and compliance challenges that can expose shareholders and practitioners to costly errors. From basis limitations and shareholder distributions to reasonable compensation and built-in gains tax, small missteps can result in significant tax adjustments, penalties, and IRS scrutiny. This focused 2-hour program examines the ten most common S corporation return issues encountered by practitioners and provides practical guidance on how to identify, prevent, and correct them. Participants will review shareholder basis calculations, loss limitations, compensation requirements, eligibility rules, and reporting pitfalls frequently identified during IRS examinations. Through real-world examples and case-based discussion, attendees will gain actionable strategies to improve accuracy, strengthen documentation, and reduce audit risk in S corporation engagements.

Highlights

MAJOR TOPICS Overview of S Corporation Compliance Framework • Eligibility requirements under IRC §1361 • One class of stock rule • Shareholder limitations • Election considerations and termination risks Top 10 common S Corporation Return Issues: 1. Failure to Properly Track Shareholder Basis 2. Improper Deduction of Losses Without Sufficient Basis 3. Distributions in Excess of Basis 4. Inadequate Reasonable Compensation 5. Shareholder Loans Misclassified or Poorly Documented 6. Built-In Gains (BIG) Tax Issues 7. Passive Investment Income and Termination Risk 8. Improper Allocation of Income and Expenses 9. Fringe Benefits and Shareholder-Employee Issues 10. State Tax and Composite Filing Oversights

Designed For

Tax Professionals

Objectives

Upon completion of this program, participants will be able to: 1. Identify common technical and reporting errors on S corporation tax returns. 2. Calculate shareholder stock and debt basis and determine the impact on loss deductions and distributions. 3. Recognize reasonable compensation requirements and related payroll compliance risks. 4. Determine eligibility and operational requirements necessary to maintain S corporation status. 5. Apply best practices to reduce audit exposure and improve return accuracy.