Guaranteed payments to S-Corp

[jasdlm]

Client and spouse are medical providers through an s-corp (the only 2 members).  They are part of a collective, and about 1/2 of their patient fees come through the collective (a partnership) as guaranteed payments.

Former preparer (this is my first year with this client) took QBI on the entire S Corp distribution amount, but I think I have to take only a proportional QBI deduction based on non-guaranteed payment income/total income.  Am I correct?

Also, for those of you better at tax history and philosophy than me, why is it okay to run GP through an S-corp and 'lose' the self-employment tax?  

Thanks so much.

[JHAYMAKER]

Jasdlm,

 

just a thought on the second issue and "Lose the SE Tax".

 

is the Scorp paying reasonable owners wages?  If they are not I would say they should be and that would be the answer to the question.

 

 

[Lee B]

15 hours ago, jasdlm said:

Client and spouse are medical providers through an s-corp (the only 2 members).  They are part of a collective, and about 1/2 of their patient fees come through the collective (a partnership) as guaranteed payments.

Former preparer (this is my first year with this client) took QBI on the entire S Corp distribution amount, but I think I have to take only a proportional QBI deduction based on non-guaranteed payment income/total income.  Am I correct?

Also, for those of you better at tax history and philosophy than me, why is it okay to run GP through an S-corp and 'lose' the self-employment tax?  

Thanks so much.

There is so much wrong with this situation.  First the guaranteed payments have to go directly to the client and spouse, upon which they owe SE tax.

Second, reasonable compensation has to be paid by the S Corp. The amount of any legitimate QBI deduction available to these clients is minimal!

This is a tax avoidance scheme gone totally wrong!