The IRS has never been fond of S-Corporations and we have seen a recent increase in audits. For the last few years we have concentrated on reasonable compensation for S-Corporate shareholder which we have made sure our clients are compliant. Recently, the IRS is focusing on shareholder basis in their stock. Basis is a complicated calculation which “basically” equals the amount you paid for your stock, plus or minus income/losses and distributions/contributions taken in prior years, plus or minus other items. A shareholder can only deduct losses up to the amount of basis in their S-corporation shares. If we have prepared your tax returns since you began your business, we know your basis. If we have not, you need to know your basis. Please contact our firm if we can help you calculate your basis. To calculate your basis we will need copies of your year tax returns from the start of your business.