Reasonable Compensation report (S-corporation and C-corporation officer)
$119.00
Format: PDF
One report per officer. If you need multiple reports for multiple officers, please choose quantity accordingly.
All reports will be prepared within 3 business days.
After ordering the service:
New clients: Create a client portal account (choose "Reasonable Compensation Report" during registration). You will automatically receive a short organizer/questionnaire to fill out inside the client portal.
Existing clients: Send “reasonable compensation” inside client portal chat.
Why is Reasonable Compensation Required for S-Corp and C-Corp Officers?
Ensuring Reasonable Compensation for S-corporation (S-corp) and C-corporation (C-corp) officers is a critical IRS requirement to maintain fair taxation practices.
For S-Corps:
Prevent Tax Avoidance: Officers might underreport wages to reduce payroll taxes. Reasonable compensation ensures officers receive a fair wage, subjecting appropriate income to payroll taxes.
For C-Corps:
Avoid Excessive Deductions: Officers might classify excessive compensation as wages to lower corporate taxable income. Reasonable compensation keeps wage deductions aligned with actual services, ensuring proper corporate and individual tax payments.
This requirement upholds tax integrity, promotes fair revenue collection, and minimizes the risk of IRS audits and penalties.
Consequences of Unreasonable Compensation:
IRS Audits and Penalties: If the IRS determines that compensation is not reasonable, the corporation may face audits, penalties, and back taxes.
Reclassification of Income: The IRS can reclassify distributions as wages, leading to higher payroll taxes and additional penalties.
