Why Every S-Corporation Owner Needs a Reasonable Compensation Basis

Steve Perry

Published on: 27/06/2025

S-corporation owners are required to pay themselves a reasonable salary for the work they perform. The IRS scrutinizes these salaries, and failure to properly document reasonable compensation can trigger audits and penalties. Many business owners struggle to determine what is considered reasonable. Steve Perry, EA at Books Taxes & More creates comprehensive, audit-proof reasonable compensation studies based on industry data, government statistics, and detailed job analysis. His studies have never lost in an IRS audit. Proactively establishing a defensible salary structure protects business owners from unnecessary payroll taxes and costly audit adjustments. Contact Steve Perry, EA to secure your defense.

Tax education articles and IRS representation advice for individuals and small businesses

Hobby or Business, What’s the Difference and Why Does it Matter?

Steve Perry

Published on: 26/06/2025

- Businesses can deduct most expenses even if they show a loss, unlike hobbies that cannot lose more than their gross income. - The IRS defines a business by its profit motive; hobbies lack this motivation. - Nine subjective factors determine if an activity is a business, including record-keeping, effort to profit, dependence on income, handling losses, adaptability, skills, past profit track record, profitability over time, and potential asset appreciation. - Passing more of these tests strengthens the case for business status, with profitability being the most critical factor. - Misclassifying a business as a hobby risks IRS audits, disallowed deductions, penalties, and interest, potentially for prior years. - Taxpayers should assess their motivation to make a profit and willingness to invest time and effort in the activity. - If profits aren’t growing despite motivation, consulting a qualified small business accountant is essential. - Professional accountants help isolate expenses and evaluate profitability, supporting better business decisions. - The key advice: focus on what you do well and delegate other tasks to experts.

Tax education articles and IRS representation advice for individuals and small businesses

Understanding IRS Letter 3164: How Steve Perry, EA Can Help

Steve Perry

Published on: 25/06/2025

IRS Letter 3164 often catches taxpayers off guard. This notice means the IRS is preparing to assign your overdue tax account to a private collection agency. While this letter does not demand immediate payment, it signals that the IRS considers your account inactive and unresolved. The purpose of Letter 3164 is to inform taxpayers before the IRS involves outside collection agencies. It offers an important window of time to resolve the issue directly with the IRS. Taking action at this stage can help you avoid the stress and challenges of dealing with third-party collectors. This is where Steve Perry, EA at Books Taxes & More can make a significant difference. Steve, a federally licensed tax professional, can review your account for accuracy, uncover possible errors, and explore options for resolution. Solutions may include setting up an installment agreement, negotiating an Offer in Compromise, or requesting Currently Not Collectible status if financial hardship exists. If you have received IRS Letter 3164, do not wait. Working directly with the IRS under the guidance of Steve Perry, EA can protect your rights and help you regain financial control. Contact Books Taxes & More today for expert help.

Tax education articles and IRS representation advice for individuals and small businesses

Know your Preparer

Steve Perry

Published on: 24/06/2025

- Over 900,000 tax preparers in the U.S. include CPAs, EAs, and unlicensed PTIN holders; all must have a PTIN but requirements to obtain one are minimal. - CPAs and EAs hold licenses, follow ethical standards, and meet continuing education mandates, while some preparers lack ethics or commit crimes. - Taxpayers are legally responsible for the accuracy of their returns; preparers rely on client-provided information and must avoid encouraging false deductions that risk perjury charges. - Some preparers allow or encourage improper deductions, leading to audits, penalties, or denial of refunds, as seen in cases where clients faced repeated state refund denials. - Clients should thoroughly review their returns, understand every entry, and research preparers’ qualifications, criminal history, experience, and professional standing. - Questions to ask a preparer include licensing, audit policies, experience, continuing education relevance, and Better Business Bureau membership. - Responsible preparation safeguards clients from legal and financial risks; taxpayers must exercise due diligence when choosing a preparer.

Tax education articles and IRS representation advice for individuals and small businesses