Can You Explain to the IRS How You Calculated
Your Salary?

December 4th, 2025.

12:01 pm.

Chuck pops up on Zoom for our annual planning meeting.

He runs Google Ads for business owners. His business changed this year. Down to two clients, primarily one.

We get to salary.

He'd been paying himself $180K. That's what the job would pay if he did it for someone else full time. Which sounds reasonable.

So I asked him to walk me through what he actually does throughout the year.

Six duties. Real hours. Proficiency scores he didn't inflate.

Thirty minutes later, the number was $144,684.

At roughly 20% savings between payroll tax and QBID, that's $7,076 every single year.

No equipment purchase. No retirement contribution. No business structure change.

Just the right number.

Chuck isn't an exception. Most S-Corp owners are running a salary that was set once and never properly verified. Not because their CPA is careless. Because a full analysis takes time nobody usually bills for.

You read the guide. You know what reasonable compensation is and why it matters.

This is the step after that.

One 30-minute call with me. I map your roles, hours, and proficiency against Bureau of Labor Statistics wage data. You get a formal, custom Reasonable Compensation Report with complete audit documentation.

Market-backed. IRS-defensible. Done for you.

Already have a CPA? Good. Show them this report. We're not filing your taxes. We're calculating the one number your entire S-Corp strategy runs on.

I didn't come to this from a textbook.

I started in accounting at 12 years old, sitting beside my mother in her part-time tax practice. She eventually bought a full firm. I worked alongside her through it all, running it full-time from 2013 through 2022. In November of that year I purchased my own firm, and I've been building it ever since.

Two decades of watching business owners leave money on the table. Not because they're reckless. Because nobody ever told them this particular number needed to be calculated.

I have a trophy story. Every accountant has one. This is mine.

Fair warning: not everyone saves this much. Not even close. But it shows what happens when the right question never gets asked.

June 2024.

I drive an hour and a half for an in-person meeting with Randy and his daughter Misty.

C Corporation. Eight million in sales. Same accountant for over ten years.

I look at the return and ask the obvious question.

"Have you ever discussed an S Corporation election?"

They look at each other.

"Nope. Never heard of it."

Ten years. Eight million in sales. Nobody brought it up.

Randy was paying himself $3.6 million as a salary trying to sidestep the Accumulated Earnings Tax. Picking the lesser of two evils without knowing there was a third option.

They went with a cheaper firm after our first meeting. About $300 a month less.

Six months later, they were back. The owner got sick. A staff member left. They couldn't get their return filed.

I got them caught up. Then I ran the comparison.

S Corporation. $500K salary.

Tax savings: $103,877.

That $300 a month Randy was trying to save cost him over $100,000 by waiting one year.

And his prior accountant of ten-plus years had been watching that money walk out the door every single year.

Again. Not typical. But the lever is always there. Most people never find it.

Here's what's more common.

Ed and his wife own an Assisted Living Facility. Both work in the business part-time. He came to me for a Reasonable Compensation Report and decided to get one for each of them.

Ed handled accounting and maintenance. About ten hours a month. Four different duties.

His wife did more day-to-day work. Roughly twenty hours a week once we accounted for their vacation schedule.

Ninety minutes.

We lowered both salaries to documented, defensible numbers.

Combined annual savings: $5,641.

Every year. From a ninety-minute call.

The process is the same every time. You tell me what you actually do. I map it to market wage data. The report shows your work in the format the IRS expects to see. The question is whether you want to know the number.

A custom, done-for-you compensation analysis for S-Corp owners who want to know their number is right.

This isn't a template. It isn't a calculator you run yourself. It's your analysis. Built from your actual roles, your hours, and your market. By an Enrolled Agent who has done this hundreds of times.

The methodology behind this report is the same Cost Approach cited in McAlary v. Commissioner, built on Bureau of Labor Statistics wage data, and backed by the IRS Nine-Factor analysis. When someone asks how you arrived at your salary, you don't have to explain yourself. The report does it for you.

When advisors offer a formal compensation study, the price starts around $997 and goes well past $2,000. And that's before anyone asks about what happens if the IRS shows up.

If it moves your salary by $25,000, you're looking at $5,000 or more in annual savings. Every year. From one analysis you run once and document properly.

That math works pretty fast.