Business
Reasonable compensation
The salary an S-corporation owner must pay themselves for the work they do before taking profit as distributions.
There is no formula and no safe percentage. The IRS describes factors: training and experience, duties and time, what the business pays others, what comparable businesses pay for comparable work, dividend history, and payments to non-shareholder employees.
Paying too little is the audit risk the S-corp election carries. Reclassified distributions come with back payroll tax, interest and penalties.
Rules of thumb circulate widely and none of them is the rule. A figure defensible for one business is indefensible for another with the same revenue.
In Contha
Contha describes the factors against what is recorded and deliberately does not produce a number. A number here would be advice, and this is software.
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