Reasonable compensation is the W-2 salary an S-Corp owner-employee should be paid for the work they perform in the business. It should reflect the owner's role, duties, experience, time worked, industry, location, and what similar businesses would pay for similar work.

The IRS looks at facts and circumstances, not one magic number. Factors may include the services performed, duties and responsibilities, time devoted to the business, comparable pay for similar roles, business size, compensation history, and distributions taken. The IRS also says officer wages should generally match the duties performed.

If your salary is too low, the IRS may reclassify some of your distributions as wages. That can create additional payroll taxes, penalties, and interest.

Yes. Paying yourself more salary than necessary may cause you to pay more payroll taxes than needed and reduce the benefit of taking S-Corp distributions. The goal is not to pay the lowest salary possible or the highest salary possible. The goal is to pay a reasonable salary that can be supported.

A yearly review is smart because your business changes. Revenue, duties, hours worked, industry conditions, and staffing can all change from year to year. Your reasonable compensation number should not be treated as "set it and forget it."

An RC Reports reasonable compensation study is a data-backed report generated through the RC Reports system. It uses information from the questionnaire, including your role, duties, location, and business facts, to produce a personalized report that supports your S-Corp salary decision.

Reasonable compensation reports can vary widely in price depending on whether they include advisory services, CPA review, payroll planning, or tax strategy. Tuesday Tax Solutions offers a self-service Reasonable Compensation Report generated through RC Reports for $250.

Salary is W-2 wage compensation paid to the owner-employee for work performed and is subject to payroll taxes. Distributions are generally payments of business profit to the shareholder and are not treated the same as wages for payroll tax purposes. That is why the salary amount needs to be reasonable before distributions are taken.

You can keep the report with your tax records and use it to help support how your S-Corp salary was determined. No report can guarantee an IRS outcome, but having a data-backed report is much stronger than saying, "I guessed."

Reasonable compensation reports are commonly offered by tax professionals, accountants, CPAs, enrolled agents, advisory firms, and specialized report platforms. Tuesday Tax Solutions provides access to a self-service report process generated directly through RC Reports.

As it turns out, not all accountants are specifically knowledgeable when it comes to setting reasonable compensation. A recent poll by RC Reports showed that 77% of tax professionals were misinformed when it came to approved methodologies for determining reasonable salary.

It's not just them though - googling reasonable compensation can give you all kinds of false information…including articles from typically reputable sources like Forbes and Entrepreneur Magazine.

You may even pay to consult with a tax professional who gives you a general rule of thumb but doesn't give you the appropriate documentation you really need…leaving you vulnerable to the IRS.

And for those accountants who DO provide a full study and supporting report, the average cost is $700+, and they may require you to sign up for a costly monthly service package.

Not so with us…we want to give you what you need at a budget-friendly price so you can keep Uncle Sam happy...without breaking the bank or overpaying in taxes!

Yes. This report is specifically for S-Corp owner-employees who need to determine and document reasonable compensation.

Yes. Tuesday Tax Solutions partners with RC Reports to provide the reasonable compensation report process.

No. You purchase, complete the questionnaire, and receive the report after completion.

Once you complete the questionnaire, the report can be generated quickly through RC Reports. If you wait to complete the questionnaire, the report waits too.

No. This service provides access to a reasonable compensation report process. It does not replace personalized tax, legal, payroll, or accounting advice.

Yes. You can use the report when discussing your S-Corp salary, payroll setup, or year-end planning with your tax professional or payroll provider.

Check your tax return or ask your tax professional. If your business files Form 1120-S, you are taxed as an S-Corp.

You will receive instructions to complete the questionnaire. After the questionnaire is completed, the report can be generated.