Reasonable Salary for S-Corps Explained

So, reasonable salary for an S-corporation is subjective, okay? The definition is like services, like enterprises, like circumstances. It's basically what would you pay someone else to do in your exact same situation. So, there's not an objective standard there, but what we do know is you should do some due diligence to determine it, right? Maybe it is pulling job options that are similar to what you do. It's also going to be documenting what do you do and how many hours do you do it. And then from that, you want to come to a good conclusion on reasonable compensation. And I often say this, which is I would rather see a lower number with good due diligence and justification for how you got there, rather than just like picking a random number, because we'll be able to come up with a better argument for the IRS if we actually show how you came to that conclusion in real time, not at the time of the audit. And for actual tax law from a tax attorney, subscribe.