The Unemployment Compensation Extension Act of 2010 was designed to follow the “pay as you go laws,” which means, the bill needed to generate taxes equal to the cost of extending unemployment payments.

What does all this have to do with S corporations? The plan was to make the small businessman pay for the unemployment bill by increasing taxes on “distributions.”

  1. Although the IRS lists factors in determining what is “reasonable,” the range of compensation for any particular job can be astonishingly wide. Would it be prudent to use national or state-specific averages for job titles? And if so, where can we obtain such data? Thanks Lee!

    • It is usually best if you use local job averages. There usually isn’t some database you can check to see what is reasonable in your area. You would just need to contact other companies in your area that do similar work and see if they will tell you how much they pay their employees to do the work.