Notes for CPAs, EAs, and tax firms on tax prep with a source for every number, reasonable compensation, and tax planning, written for the people who prepare and review the return.
Zero wages is deferral, not avoidance: reclassification, the employment tax that attaches, the additions to tax, the interest, and why the years stay open.
How BLS OEWS wage data is built: SOC codes, geography, reference period, percentiles, and the limits that matter when one figure carries a shareholder-employee's file.
The workpaper set behind a defensible reasonable compensation figure, and why the firm should own it rather than a vendor.
The statute, regulation, revenue rulings, court cases, and IRS materials that govern reasonable compensation, each with its plain-English holding.
Why a shareholder who performs services is an employee, what has to run through payroll, and the FICA, FUTA, and Additional Medicare mechanics.
Set the salary, run it through payroll, then take distributions from what remains, with the FICA math and the documentation the figure needs.
What a reasonable S-corp owner salary means under the statute and the rulings, the factors courts weigh, and why no safe-harbor percentage exists.
An S-corp reasonable salary calculator: a range from five inputs, then payroll tax, cash left to distribute, and a 199A estimate at low, mid, and high.
Most workpapers show a number, not where it came from. The citation habit that turns a CP2000 notice into a five-minute reply, not a three-week scramble.
What a Reasonable Compensation Study contains, why each part matters to a Reviewer and an examiner, and why your firm should own the workpapers for good.
What happens when the IRS reclassifies S-corp distributions as wages, what it costs, and the contemporaneous evidence that makes a salary defensible.
How S-corp salary and distributions actually split, why the 60/40 rule is a myth with no IRS basis, and what really sets a defensible reasonable salary.