If you’re an S Corporation owner and you’re not taking a Reasonable Compensation Analysis seriously, you’re already at risk.
The IRS requires that all S Corp shareholders who perform services for their company pay themselves a “reasonable salary” — not too high, not too low. And if that number isn’t backed by legitimate data? You’re a red flag in the system.
It’s a professional, third-party report based on IRS guidelines, industry data, and economic factors that determines what you should be paying yourself as an owner-employee. At Credence Tax Services, we provide a detailed, defensible report that supports your salary in the event of an IRS inquiry — and ensures you’re maximizing your tax savings legally.
A small price to avoid thousands in IRS penalties — and potentially save even more in taxes.
An audit can cost you everything. A Reasonable Compensation Analysis is your first line of defense — and a smart tax planning tool
Reasonable compensation refers to the amount of salary or wages that an S or C Corporation pays to its owner-employees for the services they provide to the company. It is important to
Determining reasonable compensation involves considering various factors such as the employee’s role and responsibilities, industry standards, geographic location, and the company’s
Reasonable compensation is important to ensure compliance with IRS regulations and avoid potential penalties or audits. It also helps establish a clear distinction between salary and distributions,
Yes, reasonable compensation can vary based on factors such as industry norms, geographic location, and the company’s financial performance.
Unreasonable compensation can raise red flags with the IRS and may result in audits, penalties, and potential reclassification of distributions as salary. It is crucial to ensure that the compensation is reasonable
To determine the reasonable compensation for your company, it is advisable to consult with a tax professional who can