Tax attorney Alan Holloway was quoted in an Oklahoman article about the Internal Revenue Service and its plans to audit 5,000 randomly selected Subchapter S corporations.
In the article, Holloway states that violation of a single one of the IRS restrictions on S corporations - some of which concern behavior of even a single shareholder - can make all the pass-through income taxable at the corporate rate.
"If you tried to make an S corporation election and don't meet one of the many requirements, you suddenly owe tax on all of that," said Holloway. "It's no longer eligible to flow through to shareholders."