Every S-Corp owner needs a number they can defend.
Reasonable compensation is the salary the IRS requires you to pay yourself. Get a report that shows exactly where your number came from. Takes about 15 minutes.
If the IRS audits your salary, can you show where the number came from?
S-Corp owners set their own salary. The IRS requires it to reflect what someone doing the same work would earn on the open market. If they think it's too low, they reclassify your distributions as wages and you owe back payroll taxes, penalties, and interest.
The IRS has told S-corp owners since at least 2008 that pay for their work should be treated as wages, not distributions (Fact Sheet FS-2008-25), and in August 2020 it started a national project on how S corporations pay their officers. A Treasury watchdog estimated that single-owner S corps with profits over $100,000 and no owner salary may have left nearly $25 billion in pay unreported across three years of returns. The IRS told that watchdog its payroll tax audits generally focus on officers, usually the owners, who were not paid as employees or whose reported wages were unreasonably low.
S-Corp reasonable compensation in 2026: what you need to know →
This has happened.
David E. Watson, P.C. v. United States
Federal appeals court, 2012
An S-Corp owner paid himself $24,000 a year while his accounting firm paid his company roughly $200,000 a year, and the company paid most of it out to him as dividends. The court said his real salary should have been $91,044 and his company owed back payroll taxes on the difference.
Joseph Radtke, S.C. v. United States
Federal appeals court, 1990
A business owner paid himself $0 salary and took $18,225 as dividends. The court held the payments were wages, so his company owed payroll taxes on every dollar of them.
We calculate a defensible salary for you.
You don't need to figure this out yourself. Describe your role and how you spend your time. We match each task to federal wage data from the Bureau of Labor Statistics and calculate a salary you can document and defend. The methodology uses approaches described in the Reasonable Compensation Job Aid for IRS Valuation Professionals. Every hourly rate traces to a public source your CPA can verify.
How it works
- Step 1
Describe your role
Select the tasks you actually perform, from bookkeeping to sales to managing employees. Rate your experience at each one.
- Step 2
We price each task
Each task is matched to BLS wage data for your local wage area and experience level, or a broader or older BLS figure where the local one isn't published. The math is documented and every hourly rate traces to a published source.
- Step 3
Download your report
Get a PDF with source citations, methodology documentation, and a salary resolution template. Share it with your CPA or file it with your corporate records.
What's in the report
A breakdown of what you actually do.
The IRS looks at the nature and scope of your work. The report breaks your role into individual tasks and prices each one using federal wage data for your local wage area and experience level, or a broader or older federal figure where the local one isn't published.
Verifiable data and a documented method.
Job category, data year, geographic area, and experience level for every wage figure, so an IRS auditor can check each wage against the same public source. The report also explains how the calculation works, how your experience level affects the number, and why your geographic area was selected.
Sample salary resolution language.
Template corporate minutes language documenting that the salary was reviewed and approved based on market data. Customize it for your company and file it with your records.
Audit support.
If the IRS asks about your report, we'll support you.
Find out what your salary should be.
Pick your tasks. Rate your experience. Get a report that shows its work.
$199 per report.
One report, one price — no subscription.
Start your reportTakes about 15 minutes. See a sample report first