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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 742
Experience:  Certified Public Accountant
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Question, I am s neurologist doing Locum work as an S-Corp.

Customer Question

Question, I am s neurologist doing Locum work as an S-Corp. I work 5 months a year and make ~$385k a year. After reading this tread and other of your comments, since the average neurologist salary working FULL TIME Is $230k, I was wondering if I can justify a salary of $115k (half of a full time/part -time )shot even $140k to deduct student loan interest of husband and I.
Submitted: 3 months ago.
Category: Tax
Expert:  Mark Taylor replied 3 months ago.

Hello, are you the only shareholder in the S-Corporation? Are there other employees? Are there other doctors?

Assuming that you are the only shareholder and you pay yourself $140,000 there will still be a large amount of income that will pass thru from the S-Corporation. This will likely take you over the limits to be able to deduct student loan interest.

Would the $140,000 be considered reasonable? If you are the only employee and only doctor, it may be hard to justify a salary of only $140,000. If there are other employees a salary of $140,000 sounds reasonable. What are the risks if it is determined to be unreasonable? The risk is that the IRS would reclassify some of the pass thru income as wages. This amount would be subject to payroll taxes which (since FICA would be maxed out) would be 3.9% of the adjustment. Please let me know if you have additional questions or need clarification.

Expert:  Mark Taylor replied 3 months ago.

Please let me know if you found this helpful or if you have any additional questions.