S-Corp Reasonable Compensation: Frequently asked questions

A single report is $199. Tax professionals can also choose an annual plan: Starter $499/year for 10 reports, Professional $999/year for 30, or Firm $1,499/year for 60 ($24.98/report on the Firm plan at 60 reports). See the pricing page for details.

Yes. There's a full sample report on the site, no email required. Cost and Market reports of your own have the same format, data sources and methodology documentation.

Email help@wageproof.com. If the report is materially defective because of a verifiable software error — a figure inconsistent with the underlying BLS data, for example — we'll fix it — and if you bought a single report, you can request a refund within 30 days of purchase instead. Refunds aren't available simply because you disagree with the figure or entered inaccurate inputs. Full terms are on the Terms page.

Yes. Annual plans renew automatically for another one-year term at the then-current price, charged to the card on file on the renewal date, unless you cancel first. We email you a renewal notice before each renewal with the amount and the date. The Account owner can cancel any time from the Billing page; cancellation takes effect at the end of the current term and you keep access until then. Single reports are one-time purchases and never renew.

Yes — on an active subscription you pay the flat difference between the two plans, your remaining reports carry over plus the tier difference (up to the new plan's maximum), and your renewal date does not change — your plan renews on your existing renewal date at the new plan's price at that time unless you cancel. You can also schedule a downgrade to a lower plan from your Billing page; it takes effect at your next renewal, and this cycle's reports and add-on packs are unaffected.

Yes. You can buy a 10-report pack at a discounted per-report rate — $499 on Starter, $349 on Professional, $249 on Firm. It's a one-time purchase, not a change to your subscription. The Account owner buys packs from the Billing page any time the plan is active. Your plan's reports are always used first; pack reports are used after those run out, and unlike plan reports they don't expire at renewal — they stay on the account until you use them. Single reports are also available at $199 each.

Yes, on Professional and Firm plans. Professional supports up to 10 seats; Firm supports unlimited seats. Starter and Pay Per Report stay at one seat. Everyone on the account shares one client roster and one pool of reports; the firm's Account owner manages billing while admins manage the team and members handle client work.

The three calculation approaches are the ones described in the Reasonable Compensation Job Aid for IRS Valuation Professionals, a 2014 reference guide written by IRS valuation professionals (it says it is not an official IRS position). The wage data comes from the Bureau of Labor Statistics. It is free and public, and IRS experts have used it in Tax Court cases. Every wage figure cites the BLS occupation code, geographic area, and data year, so an examiner or your accountant can check each one against BLS. The full methodology is published on this site for anyone to review. We always recommend reviewing the report with your CPA, EA, or tax advisor.

Subject to our Terms, we'll support you in an audit. Every report includes audit support at no extra charge: if the IRS or a state tax agency asks about the salary in a finalized report, contact us at help@wageproof.com and our team will explain how the report was built, the BLS data it used, and how each figure was calculated. It's available for four years after you finalize the report, whether or not you still subscribe. We explain the report; your CPA, enrolled agent or attorney represents you before the IRS.

Yes. The report generates a downloadable PDF built for exactly this. Share it with your tax professional for review, attach it to your corporate minutes, or include it as supporting documentation if the IRS questions your salary. The PDF includes full source citations, a methodology explanation, and a written consent or board resolution template.

It's the salary an S-corp must pay its owner-employees for the work they perform. The IRS requires it to be comparable to what someone in a similar role would earn in the open market. Getting it wrong can trigger penalties, back taxes, and interest.

S-corp owners can split income between salary (subject to payroll taxes) and distributions (not subject to payroll taxes). The IRS watches for owners who pay themselves too little to avoid employment taxes. The IRS notes that courts have consistently held that owners who do more than minor work for their S-corp are employees whose pay is subject to employment taxes, and courts have upheld the IRS treating distributions as wages when the salary was too low.

The IRS can reclassify some or all of your distributions as wages. You'd owe back payroll taxes — both the employee and employer portions, which roughly doubles the tax hit — plus interest and potentially penalties. The IRS generally has three years from April 15 of the year after the payroll returns cover (or from when they were filed, if later) to assess back payroll tax, and no time limit if they were never filed.

No. The IRS has not established a fixed formula, percentage, or safe harbor. Reasonable compensation depends on the facts and circumstances: the nature of the work, the owner's experience, geographic location, hours worked, and what comparable roles pay. That's why documentation matters.

The tool supports all three IRS-recognized approaches for reasonable compensation. The Cost Approach ("Many Hats" method) breaks your role into individual tasks and values each one using BLS wage data. The Market Approach compares your primary occupation to what that role earns in your area. The Income Approach (Independent Investor Test), available on CPA and tax-professional accounts at every plan level, determines compensation based on the company's financial performance and a target investor return — no BLS data required. See the methodology page for full details.

All wage data comes from the Bureau of Labor Statistics Occupational Employment and Wage Statistics program. Where BLS's own assignment for the survey year can be confirmed, we use the wage data BLS publishes for your county's own wage area — a metropolitan area or a named nonmetropolitan area — wherever it covers the occupation. When it doesn't (some occupations are too thinly staffed in an area to be published), the report falls back to a broader or older BLS figure and states on the page which substitution it made and why. No proprietary databases, no undisclosed adjustments.

The report calculates reasonable cash compensation (salary) based on BLS wage data. It does not separately value health insurance premiums, retirement plan contributions, or other fringe benefits. The IRS Job Aid says it is important to look at an employee's total compensation package, so discuss the treatment of benefits with your tax advisor.

We use the Bureau of Labor Statistics Occupational Employment and Wage Statistics release for your report's tax year when BLS has published one, and otherwise the most recent release. BLS publishes new data annually, typically in the spring for the prior May survey period. When new data becomes available, we update the tool. When your report's tax year is later than the BLS survey year, wages are projected forward to that tax year using the BLS Employment Cost Index — a published federal series — and the report states the adjustment it applied. When the survey year already covers your tax year, no projection is made and the report says so. Either way it shows which data year was used.

Yes. Create a report, generate a questionnaire link, and send it to your client by email. They fill it out on their own (takes 10-15 minutes), and you review their answers before generating the report.

Yes. Your firm dashboard lists all your clients with their report history and questionnaire status. You can start a new report or resend a questionnaire from the same place.

Yes. Professional and Firm plans include white-label branding. Upload your logo and accent colors once, and every client report is automatically branded with your firm's identity.

You could. But with annual plans, the time savings alone make it worthwhile. The report handles the BLS data lookup, geographic fallback logic, wage adjustments, and methodology documentation. You review the inputs and deliver the report. Your clients get a documented PDF; you skip the manual data work.

BLS publishes wage estimates for about 830 detailed occupations. The Cost Approach (Many Hats method) decomposes the owner's role into individual tasks, so an unusual business can often be covered by the combination of tasks the owner actually performs.

About 15 minutes. You walk through a short questionnaire describing the owner's role and how they spend their time. The report generates immediately after. Download the PDF whenever you need it. Finalized reports do not expire while your account is active. Drafts auto-finalize 30 days after the figure is ready, so you always have a report.

Yes. You'll need a free account to unlock and manage your reports; owners can answer the questions before signing up. Signing up takes a minute.

Yes. The tool supports reports for recent tax years using the corresponding BLS wage data. When creating a report, select the tax year from the dropdown. The report will note which BLS data year was used.

No. The tool produces a compensation analysis based on public wage data and a calculation method consistent with IRS guidance. It is not tax, legal, or financial advice. The right number depends on your specific facts and circumstances. Work with a qualified tax professional.

Your data is stored on encrypted servers hosted by Vercel and Neon (our database provider). A report is visible to the account that created it; on a firm account, every member of the firm can see the firm's reports. We never see your tax returns, bank accounts, or financial statements.

Yes. Each owner-employee gets their own report based on their specific role, hours, and experience level. If two owners split duties differently, their reasonable compensation figures will reflect that. Create a separate report for each owner.