IRS Reasonable Executive Compensation

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Course Number:12
Category:Executive Compensation
Field of Study:Taxes
Audience:Executives, HR Managers, Compensation Managers, Compensation Analysts, HR Generalists
Level of Difficulty:Advanced
Delivery Method:QAS Self Study
Prerequisites: Moderate algebraic training
Advanced Preparation:None
SHRM BASK:As defined by the SHRM Body of Applied Skills and Knowledge (BASK), this self-study course relates to competencies in Business Analysis with functional areas in Total Rewards and U.S. Employment Law and Regulations.
OverviewThe U.S. Internal Revenue Service (IRS) monitors executive compensation in closely held companies to ensure that any pay that is deducted meets the tests for reasonable compensation. This course looks at IRS compensation challenges that arise when shareholder-employees improperly reduce their taxes through underpayment or overpayment of compensation, depending on whether the company is a sole proprietorship, partnership, small business, limited liability company, subchapter S corporation, or C corporation. We will also look at reasonable pay in tax-exempt nonprofit organizations. The course will identify how to establish reasonable compensation and examine an additional standard that some courts have applied, the independent investor test. We teach reasonable compensation analyses based upon executive compensation salary surveys, proxies, and IRS form 990’s.
Learning Objectives:
  • Recognize how using deductible pay as a business expense can result in an IRS reasonable compensation determination
  • Identify the IRS tests for reasonable compensation according to IRC 162(a)
  • Define the concept of competitive norms
  • Recognize factors that the courts have used to determine reasonable pay
  • Specify how different legal business structures impact taxes levied on executive compensation packages
  • Recognize the causes of compensation variance and the arguments that may be made for compensation that at first glance may not meet the tests of reasonableness
  • Identify the company and personal federal income tax deductions that may be taken for stockholder-employee benefits and fringe benefits
  • Recognize what a constructive distribution is, and the potential penalties associated with it
Credit & Professional
Continuing
Education Information:

  • SHRM-CP/SHRM-SCP Credit Information:

    ERI Distance Learning Center is recognized by SHRM to offer Professional Development Credits (PDCs) for SHRM-CP® or SHRM-SCP® recertification activities. This program is valid for 1.5 PDCs for the SHRM-CP® or SHRM-SCP®. For more information about certification or recertification, please visit www.shrmcertification.org.

    SHRM Preferred Provider

  • aPHR/PHR/SPHR/GPHR Credit Information:

    ERI Distance Learning Center is a recognized provider of recertification credits. The HR Certification Institute® (HRCI®) has pre-approved this activity for 1.5 HR (General) credit hour(s) towards aPHR™, PHR®, SPHR®, and GPHR® recertification.

    HRCI Approved Provider
    HR Certification Institute’s® (www.HRCI.org) official seal confirms that ERI Distance Learning Center meets the criteria for pre-approved recertification credit(s) for any of HRCI’s eight credentials, including SPHR® and PHR®.

  • CCP/CBP/GRP/WLCP Credit Information:

    This online course qualifies for recertification credit for the Certified Compensation Professional (CCP®), Certified Benefits Professional® (CBP), Global Remuneration Professional (GRP®), and Work-Life Certified Professional (WLCP®) designations granted by WorldatWork Society of Certified Professionals. For more information on recertification, visit the Society website at www.worldatworksociety.org.

  • CPE QAS Self Study Credit Information:

    National Registry QAS Self Study - Course approved for 1.5 credit(s) in these states:

    Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virgin Islands, Virginia, Washington, West Virginia, Wyoming

    Course approved for 1 credit(s) in Vermont

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Additional Information:
*The Course Credit List displays credits and credit types offered by location.
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The ERI Distance Learning Center is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: https://www.nasbaregistry.org/

ERI Economic Research Institute is recognized by SHRM to offer Professional Development Credits (PDCs) for the SHRM-CP® or SHRM-SCP®