Reasonable compensation studies your firm can stand behind.

Every figure in a reasonable compensation study traces to its source, occupation, geography, and period. Your Reviewer signs off on the record. The finished workpapers stay with your firm.

The interview flags its own contradictions before anyone reviews it. The wage evidence arrives with its trail attached. What reaches your Reviewer is a number they can check line by line.

Get startedSee how a Study is built

Line art in two panels, no photography and no people. Left: a compensation figure ruled underneath, a tick scale, a citation chip naming the source release, geography and occupation code, and a confidence marker. Right: a vertical rail with one rung per evidence field, each rung followed by a labelled ruled line reading source, occupation, geography, period, transformation.

Illustrative sample data

What is a reasonable compensation study?

A reasonable compensation study documents what an S-corporation shareholder-employee should be paid as salary for the work they actually do, using duties, time, proficiency, and comparable wage data. It supports the salary figure on the return and the workpapers behind it. (IRS, S corporation compensation and medical insurance issues)

The spreadsheet is not the problem. The memo is.

If you build the study by hand, it starts near zero every time. A wage table pulled from public data, a spreadsheet, and a memo explaining the number. That holds up fine, until someone has to defend it.

Three things go wrong.

Preparer time.
The interview, the wage lookup, the write-up. Across an S-corporation client book, that is a real line in your season.
Reviewer trust.
Your Reviewer is signing a number they cannot fully trace. They either rebuild the analysis themselves or accept it on faith. Neither one is a control.
The two-year question.
A client or an examiner asks where the number came from. The preparer who built it has moved on, the wage source has been revised, and the memo says "per BLS data."

Handing the study to someone outside your firm retires none of the three. You still have to explain the derivation to a reviewer or an examiner years later.

Line-art comparison in two panels, no photography. Left, drawn at reduced contrast: a three-sided open box with a dashed line and an arrowhead running off it to nothing, captioned source? beneath. Right, at full contrast: a horizontal spine carrying four solid nodes with a tick between each pair, and below it a compensation figure with its citation chip and confidence marker. Neither panel draws an uncited number.

Illustrative sample data

Six steps, and you own all six.

Your firm runs the whole pipeline. Nothing is handed to an outside preparer and nothing comes back to you as a black box.

A horizontal strip of six markers on one baseline, each marker carrying its own numeral from one to six. The fourth marker is drawn filled and larger than the other five, and the baseline thickens through it to mark the control point. Short ticks sit between adjacent markers. Line art only: nothing is drawn inside the markers except the numerals, and no step names appear.

Illustrative sample data

  1. Intake.

    You run a guided shareholder interview alongside your own firm intake, covering duties, time allocation, proficiency, and business economics. If the answers contradict each other, you see it before your Reviewer does.

  2. Evidence.

    You get versioned public wage data, and each figure carries its source, occupation, geography, period, and transformation at field level.

  3. Calculation.

    Same inputs, same result. Open the working whenever you want to see how it got there.

  4. Review. Control point

    Every Preparer adjustment carries a written rationale. TracePrep records the approval against the version your Reviewer actually saw.

  5. Deliverable.

    You get a branded PDF, the structured data behind it, and an immutable evidence manifest.

  6. Retention.

    Your finalized evidence stays with your firm regardless of subscription status.

See how a Study is built

What your firm gets that a wage table cannot give you.

Four square tiles of line art in a two-by-two grid, each over a ruled texture, with no words drawn in any tile. First: two open nodes joined by connectors that end in two short ruled rows. Second: a horizontal spine with three nodes, the last one left unfilled, each marked by a tick. Third: a dashed boundary enclosing a small solid block beside three ruled rows. Fourth: two columns of three rules with one right-hand rule thickened against its neighbour.

Illustrative sample data

  • Traceable evidence.

    Open any number in a finished Study and the trail is already sitting there. Nobody reconstructs it two years later under pressure.

  • Reviewer sign-off.

    Your Reviewer stops rebuilding the analysis in order to trust it. The audit log already shows who prepared it, who changed what, and who approved.

  • Firm-owned workpapers.

    What you finish is yours permanently, subscription or not. The tax file stays complete on your side of the line.

  • Annual continuity.

    Year two is a deltas job. Prior-year facts carry forward with a change analysis attached.

The discipline is the product.

A finished study reads the same on the page whether the number behind it holds up or not. What separates the two is whether anyone can still inspect how it was built.

The conclusion on your client's compensation belongs to your Reviewer, not to the software.

What TracePrep is responsible for is everything sitting underneath that conclusion. A reasonable compensation study is only as good as the evidence beneath the number, so you never get a figure the system cannot trace back to a source. If your Preparer adjusts something without writing down why, it does not save. And a Study stays unfinished until your Reviewer has approved it on the record.

That is a narrow promise on purpose. The judgment stays yours. The proof of where the number came from should never be the part you have to reconstruct.

A single line-art diagram. A small ruled card at the left sits on a path that runs the full width, crossed by three tall frames the record passes through, each numbered above it and marked by a tick below. The third frame is drawn in a different colour from the first two. Beneath the drawing, three labels read source required, rationale required, approval required. Authored illustration, no photography and no people.

Illustrative sample data

Where does your client's salary land?

Before you build the full Study, get a rough read. The calculator takes an occupation, a geography, and a time split, and shows you the wage range those inputs point to, with the source behind the range.

It is an orientation tool, not a Study. No workpapers and no Reviewer sign-off.

Open the reasonable compensation calculator

A line-art card. Three labelled ruled rows stand in for the inputs, reading occupation, geography and time split, above a scale of eleven ticks carrying a thickened range bar with end caps across roughly its middle half. Below the scale the output range is drawn, with its citation chip and confidence marker.

Illustrative sample data

Questions firms ask

What is a reasonable compensation study?
The IRS frames the question around what the shareholder-employee actually did for the corporation and where its gross receipts came from (IRS FS-2008-25). A reasonable compensation study answers that in writing, with the wage comparison and the reasoning behind the figure on the record. TracePrep produces one as a deliverable your firm keeps.
Who signs off on the Study?
Your firm's Reviewer does. TracePrep hands the Reviewer the conclusion, every figure's source trail, and each Preparer adjustment with its written rationale, then records the approval in the audit log. Your Reviewer holds both the conclusion and the delivery. TracePrep supports that judgment; it does not make it.
Where does the wage data come from?
Public wage documentation, ingested and versioned. The primary source is the Bureau of Labor Statistics Occupational Employment and Wage Statistics program (BLS OEWS). Open any figure in a finished Study and you see which source, occupation, geography, and period it came from, plus what was done to it. Full detail lives on the methodology page.
What happens to our studies if we stop subscribing?
Finalized evidence and workpapers are yours permanently, evidence manifest included. Cancelling ends access to new Studies. TracePrep keeps your finished Studies downloadable for three years after cancellation, so export them into your own tax file before that window closes.
How much work is year two?
A fraction of year one. Your Preparer works the deltas instead of rebuilding the interview and the evidence from scratch. The change analysis shows your Reviewer exactly what moved since the last signed Study.

Build the next one where it can be checked.

Start a Study, or walk the six steps first and see what your Reviewer would be signing.

Get startedSee how a Study is built

TracePrep is a software product from TracePrep Inc., not a CPA firm. This content is operator experience for educational purposes; it is not tax advice and has not been reviewed by a licensed CPA. Consult a qualified tax professional for guidance on your specific situation. Source citations in TracePrep workpapers support audit defense but do not guarantee IRS outcomes.