What are common mistakes made in S-Corporation tax returns?

Although many Form 1120 S-Corporation tax returns are prepared by paid tax preparers, many also run into audit trouble. Many preparers make mistakes from time to time for various reasons. In fact the IRS just released a study that found that 71% of S corporations who used paid preparers to prepare their Form 1120 tax returns were non-compliant due to mistakes that usually benefited the taxpayer-shareholder. They also found that S corporations are one of the fastest growing business types in the country. Common mistakes are (a) deduction of ineligible expenses, (b) miscalculation of shareholder basis in the assets of the business and (c) payment of inadequate wages to shareholder-employees. I recommend that you retain professional help when facing a corporate audit.