Why I Built WageProof

When I elected S-corp status for my consulting firm, I knew I'd have to pay myself a reasonable salary and that the IRS could question it years later. Executive compensation is part of my day job (I'm a fractional COO and CFO, mostly for nonprofits), so I figured I'd have a number in an afternoon.

What the chatbots said

I described my business and my role to a few AI chatbots and asked what a reasonable salary would be. The answers came back fast and sounded sure of themselves, but when I compared them with public wage data, they didn't match. Some of the figures looked hallucinated. With no method behind them that I could defend, I wasn't going to put any of it on a tax return.

Later, when we were writing an article on AI and reasonable compensation, we ran the same kind of question through a chatbot with web search turned on. It never got to the Bureau of Labor Statistics wage tables, and its answers were off by as much as $30,000.

The report my accountant recommended

My accountant referred me to an online tool that produces reasonable compensation reports, and I paid almost $500 for one. I'm pretty tech-forward, so I started on my phone. The site wasn't mobile friendly and I couldn't enter my information. After contacting support, I eventually got through it on my laptop. I never saw anywhere to pick a tax year, and the report came back for the wrong one. I had to contact support again to correct it.

The report itself was pretty bare, and for what I'd paid I didn't love how it looked. It was also a black box to me: I went through it several times and still couldn't trace its wage figures to a source or see how they added up to my salary.

I had other issues with my accountant, and this was the last straw. I moved to a new firm not long after. They had recommended the tool, so to me it was part of their service, and every problem I had with it landed on them, whether that was fair or not.

What a CPA's tool should do

I've spent years building tools on public data, including a compensation benchmarking tool that covers 1.9 million IRS 990 filings. This time I wanted to build something for CPAs, a tool that helps them take care of clients like me and gives those clients a good experience.

When a CPA recommends a tool, the client's experience with it is part of the CPA's service. With WageProof, the client gets a link with their firm's name on it and opens it on their phone without creating an account. The questions are things an owner actually knows, like the tasks they do and roughly how their hours split between them. If the CPA has already filled some of it in, the client only has to check it, and the whole thing takes about 15 minutes.

The report is what the client keeps, and I wanted it to look like it came from a professional firm. I put a lot of work into the design, partly because of the report I'd paid for, and firms on our Professional and Firm plans can put their own logo, colors and name on it. There's a full sample report if you want to see one.

None of that helps if the tool is a chore for the firm. A CPA starts a report for a client, sends the link, and can see at a glance who has answered. They get an email when a client finishes, and if someone never gets to it, the CPA can fill it in themselves.

And I don't think anyone holding the report (the owner, their CPA, or an auditor) should have to take the salary on faith. Every wage figure lists its occupation code, data year, geographic area and percentile, which is enough to find the same starting number on the Bureau of Labor Statistics website and follow each step from there. The method is published on our methodology page rather than kept as a proprietary model.

Owners without a CPA can buy a report on their own, priced for small businesses like mine. If you try it and something doesn't work, email help@wageproof.com and tell me.