Questions about Reasonable Com­pensation Studies

Every Number Has a Source. That is the product claim, and these answers say what it does and does not mean in practice: what a Study contains, where its evidence comes from, who signs off, and what your firm still holds years later.

How to read these answers

The questions are grouped five ways: what the platform is, how a Study is built, what your firm owns afterwards, how client information is held, and how to start. Read the group that matches the decision in front of you rather than the page top to bottom.

Every answer links onward to the page carrying the full account. A short answer nobody can check is the thing this product exists to replace, so none of these is asked to stand on its own.

See how a Study is built

Illustration of questions arranged in five groups

Product

What the platform is, who it serves, and what it produces.

What is a Reasonable Compensation Study?
It is the workpaper set behind the salary an S corporation pays a shareholder-employee. A Study fixes the period and the role, ties each input to a published source, records a figure, and carries a reviewer’s sign-off. The number on its own is not the deliverable. The deliverable is a file someone can open two years from now and test, decision by decision, without taking anyone’s word for it. Our guide to reasonable compensation covers the tax question underneath; this page covers how the platform handles it.
Who is TracePrep built for?
CPA firms, EA practices and accounting firms that put their name on S-corporation compensation for their clients. The workflow assumes a Preparer and a Reviewer working inside the firm’s own engagement, and it assumes the firm keeps the file afterwards. If one person does both jobs at a small practice, that still works: the roles describe the steps, not the headcount. See how a Study is built shows the six steps and which role acts at each one.
Who signs off on a finished Study?
A qualified reviewer at your firm. TracePrep records who signed off and on what date, and it never stands in for that person. The reviewer sees each input beside its source and each adjustment beside its written rationale, so they can disagree with one specific decision instead of accepting or rejecting a finished number. Sign-off is a professional taking responsibility inside your engagement, which is why it is a person and not a status flag. The review step describes exactly what that person works through.
What does a firm hold when a Study is finished?
A self-contained workpaper set: the figure, the inputs, the source behind each input, the rationale behind each adjustment, and the recorded sign-off. It reads without access to the platform that produced it, so a client, a successor firm or an examiner can work through it directly. A sample Study shows the cover, the table of contents and one redacted evidence page, which is enough to judge whether the format fits how your firm files workpapers.

Method

Where the numbers come from, and what we publish about how they are reached.

Where does the wage data come from?
Published federal wage data from the Bureau of Labor Statistics Occupational Employment and Wage Statistics program, cited in the Study by release. A reader can open the same public table and see the same figures. Nothing rests on a private benchmark the person checking the file cannot reach. Each release a Study draws on is versioned, so a Study built last year still points at the data that existed when it was built rather than at whatever the source says today. The evidence step covers how an input gets attached to its source.
Which approaches does a Study apply?
The approaches the IRS recognizes for valuing an owner’s services, applied to the facts captured at intake: what the shareholder-employee actually does, the period under study, and the compensation already recorded. Which approach carries weight in a given file is a question about the facts, and the Study records the reasoning instead of asserting a result. That is the difference between a figure you can defend and a figure you can only repeat. See how a Study is built walks the calculation step in order.
How are adjustments recorded?
Every adjustment carries a written rationale sitting next to it. That is the mechanism a reviewer needs: they can agree or disagree with one specific decision rather than argue with a total. We publish that adjustments are documented and we do not publish how they are sized or chosen, because a published formula is a formula anyone can run backwards toward a preferred answer. The six-step flow shows where in the process each rationale is written.
How often should a Study be updated?
Once a year, and again whenever the facts move: duties change, hours change, a new entity appears, or the year turns out materially different from the last one. Reasonable compensation is a yearly question, so a Study is a yearly record rather than a one-time document. Each year starts from the retained prior Study instead of from memory, which is what makes this year’s figure comparable to last year’s. Annual continuity is the sixth step of the Study pipeline.
What do you publish about the method?
Structure and sources, not internal mechanics. We publish the six steps, the public data a Study draws on, the recognized approaches it applies, the fact that every adjustment carries a rationale, and who does what. We do not publish coefficients, mapping tables or selection rules. A method published in full is a method that can be worked backwards toward a chosen answer, which would make every Study built on it worth less to the firm that signed it. Our reasonable compensation guide covers the underlying tax question in the open.

Firm ownership

Who owns the work, and what happens to it when the relationship changes.

Who owns the workpapers a Study produces?
Your firm, permanently. Finalized evidence and workpapers belong to the firm that produced them, and that does not change with the status of your account. The deliverable is self-contained, so it stays readable without the platform. This is the part of the product that matters most when a file is old: ownership that depends on an active subscription is not ownership. A sample Study shows the form the file takes when it leaves.
What happens to our Studies if we cancel?
You keep them. Finalized evidence and workpapers are your firm’s property permanently, and finalized Studies remain downloadable in TracePrep for exactly three years after the cancellation date. Export what you need inside that window and the files sit in your own document system for as long as you choose to keep them. Nothing about cancelling touches your ownership of work you already finished. Retention is the sixth step in how a Study is built, and it is written that way on purpose.
Can we export a Study out of TracePrep?
Yes. The workpaper set is built to leave: it travels with its evidence rather than pointing back at a system the reader cannot open. Hand it to a client, attach it to a return file, or produce it on request years later. A deliverable that only renders inside the tool that made it is a dependency, not a workpaper. A sample Study shows what an exported file actually contains.
Whose engagement is a Study part of?
Yours. TracePrep is the platform your firm works in; the engagement, the client relationship and the professional judgment stay with you. We do not review, bless or countersign a Study, and no output claims that we did. The three roles in the workflow are Preparer, Reviewer and Firm, and all three of them are yours. The roles table sets out which role acts at which step, including the steps where a role does nothing.

Security & data

What a Study needs from you, who sees it, and what the record shows.

What client information does a Study need?
The entity, the shareholder-employee, the role actually performed, the period under study, and the compensation already recorded. That set is what everything later is measured against, and it is captured in one structured place at intake rather than reconstructed afterwards from a folder of documents. A fixed scope is what lets two people reach the same figure from the same file and say which question they answered. The intake step describes what gets captured and why each piece is there.
Who at our firm can see an engagement?
The people your firm puts on it. Work moves through the Preparer and Reviewer roles inside your own engagement, and the Firm holds the finished record. Access is your decision, not something the platform makes for you. The one step no role skips is sign-off: a Study is not finished until a reviewer at your firm accepts it, and the file records who that was. Get started opens an engagement so you can see the roles working on a real file.
What does the file show about who did what?
Each input carries the source it came from. Each adjustment carries the reason it was made. The sign-off carries the identity of the reviewer who accepted the Study and the date they accepted it. That is the record: not an assertion that the work was done well, but the trail that lets someone else decide whether it was. See how a Study is built shows where each of those marks is created.

Getting started

Where to look first, and what a first engagement asks of you.

What is the fastest way to see what a Study looks like?
Read one before you open an engagement. The sample Study shows the cover, the table of contents and one redacted evidence page, which is enough to tell whether the format fits the way your firm files workpapers. It carries illustrative sample data: it is not tax advice and not a real client file. If the format works for you, the next step is a live engagement rather than a longer sample.
How do we open our first engagement?
Start on the Get started page and open a Study on a live S-corporation file. There is nothing to migrate first. A Study needs the entity, the shareholder-employee, the role performed, the period and the compensation already recorded, and you already hold all five for any client you are considering. The first engagement runs the same six steps as every later one, so the first file is also the quickest way to learn the workflow.
Is the reasonable compensation calculator the same as a Study?
No. The calculator gives you a quick figure to orient a conversation with a client. A Study is the workpaper set behind a figure: fixed scope, sourced inputs, documented adjustments, a reviewer’s sign-off, and a file your firm keeps. Use the calculator to decide whether a client needs a closer look. Use a Study when somebody may later ask how the number was reached.

Where these answers lead

Five groups of short answers can only carry a decision so far. Each one points at the page holding the full account: the six steps and the role that acts at each of them, a worked sample of the finished file, and the guide to the tax question underneath.

If a question here is close to yours but not quite it, follow the link inside the answer and read the page it names. These answers are written to hand you onward, not to settle the question by themselves.

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