IRS scrutiny of reasonable compensation usually deals with excess compensation paid to the shareholders of closely held corporations and unreasonably low salaries to shareholders of an S corporation.

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This statement is true. The IRS does review and scrutinize the reasonableness of compensation paid to shareholders of closely held corporations and S corporations. The focus is on ensuring that shareholders are not using compensation as a means to avoid paying appropriate taxes on their profits. Excess compensation may be subject to additional taxes, while unreasonably low compensation may also raise red flags with the IRS.

IRS Scrutiny of Reasonable Compensation Usually Deals with Excess Compensation