Goldilocks makes decisions for the IRS now? |

As I have recently written, the SEC (US Securities and Exchange Commission) is not currently enforcing the rules about executive pay reporting. This, despite the fact that most public companies pay excessive salaries to their executives. And, the IRS rarely challenges the pay that these public companies afford their bloated executive ranks.

But, you shouldn’t be surprised that these rules are not universal. Nope. If you are an executive with a private company (or a soloprenuer)- WATCH OUT. The IRS spends a great deal of time dealing with YOUR pay scale . (I have often written about the concept of reasonable compensation. And, no, your definition of reasonable does not win the day…)

It would not be unusual for the IRS to consider private executive pay too high or too low. Either way, they get to assess additional taxes (and those glorious penalties and fines.) And, it’s going to get worse. A lot worse.

You know that (ridiculously called) bill- the American Taxpayer Relief Act? You know, the one that “restored” the Bush tax cuts? It doesn’t stand alone, either. We also have PPACA (the Patient Protection and Affordable Care Act)- also known as Obamacare.

Well, both of these laws imposed additional tax on highly compensated individuals. Which, of course, means many executives are going to try to escape those additional taxes. The one that will be harder to miss is the additional Medicare Tax (3.8%) imposed on the higher compensated individuals in the US. (There are also higher dividend taxes on corporate distributions- so don’t go telling me- or your personal advisor [if you are not wise enough to use me 🙂 ]- that you will just take more dividends and less salary. That won’t work, either- and you could still leave yourself liable for penalties for paying too little compensation!)

So, effective now, you must insure that you are paying your executives (and/or yourself) enough- and not too much…

Ah, no wonder the US tax system makes me smile.

(In case you didn’t get the Goldilocks reference… It’s not too much, it’s not too little… it’s just right.)

OH- Today is the first day you can file taxes in the US. Check out our site (a direct link to the information is found here) to get the scoop on this year’s tax situation.