Level 10

S Corporation

Forum|Forum|10 months ago
August 21, 2025
4 replies
23 views

S Corporation.

What are the best firms to provide reports and analyses of S Corp reasonable compensation?

ChatGPT? I used it and it researched the BLS salary data, which surprised me, so might be good for this.

Tax Talk

S

strongsilenceAuthor

Level 10

Also, I'll need to persuade the client that $500 to $1,000 is a reasonable price for this service. I have told them of the laws and the risks.

Finally, should I use a cost approach or a market approach?

BobKamman

Level 15

Entrepreneurs are often the last ones to get paid even in an established business. I don't think you are going to find any comps, for owner/employees. And why do you think you need them? IRS doesn't have the staff to audit, even the S Corps who pay no salary. What happens if clients pay themselves minimum wage? At worst, amended employment tax returns, and amended 1040's for the employment tax deductions.

Facts and circumstances. Research ChatGPT for that phrase.

S

strongsilenceAuthor

Level 10

This is a very profitable business and the ration of Wages to Distributions is about 1:2. So that will be a flag.

Considering the IRS situation, I think a RC analysis would be overkill. But now that I have alerted them to this, they said "just give us the wage amounts you think are reasonable." So I don't know if I want to back out of this project now.

At worst, I lose a client.

BobKamman

Level 15

I think other practitioners have recommended a 1:2 ratio to avoid audits. You will have to do a lot of research to find any cases where IRS took something like that to court, and won.

IRonMaN

Level 15

Do you have clients in similar professions to compare to?

Slava Ukraini!

S

strongsilenceAuthor

Level 10

Do you have clients in similar professions to compare to?

Maybe. I'm not sure if asking them for this research would feel like an imposition in their busy professional lives.

IRonMaN

Level 15

"Maybe. I'm not sure if asking them for this research would feel like an imposition in their busy professional lives."

I'm not suggesting any research, just simply look at what they are showing on their W-2 to see how reasonable it is to your client's W-2.

Slava Ukraini!

qbteachmt

Level 15

I use https://rcreports.com/

I also use BLS, since it's regional. When we were a reporting entity, I used BLS to show an employee that, gee, we are paying you right on target for your position in this region.

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