Your S-Corp Salary Isn’t a Guess. It’s an Audit Risk

If you own an S-corp and someone asked you to justify your salary to the IRS tomorrow, could you?

Reasonable compensation is one of the most scrutinized numbers on an S-corp return, and most owners set it by feel: a round number, prior year plus a little, whatever’s left after distributions.

The IRS doesn’t grade on feel. It looks at what someone in your role, industry, and market would actually be paid, and it can reclassify distributions as wages, complete with penalties and back payroll tax, if your number doesn’t hold up.

The fix isn’t complicated. Benchmark your role against real compensation data and document how you got there, before an examiner asks.

That one page justification is cheap insurance against a very expensive conversation.

Know your number before the IRS decides it for you.

If you want a second set of eyes on what reasonable compensation looks like for your role, message me and we’ll work through it together.