The IRS Targets Income Tricks – Nothing really new here. IRS has always tried to classify as much income as possible as W-2 wages in order to be able to charge payroll taxes.
It has always been my contention that IRS does not have the right to unilaterally change the compensation package that has been negotiated between a company and its workers. Rather than take conventional salaries, some people prefer to be paid in other forms, such as leases and royalties, or in the form of fringe benefits. A combination of these is the most common arrangement.
A perfect example of this is Steve Jobs, who takes an annual salary from Apple of one dollar, but makes up for that with other fringe benefits, as well as appreciation in the value of his company stock. If such an arrangement is good enough for the Chairman of a multi-billion dollar corporation, it should be just as acceptable in much smaller corporations.
Tax Guru - Ker$tetter Letter 