S-corp reasonable salary: what is everyone actually paying themselves in Utah?

npm_install_life · 7/8/2024

My CPA and I go around on this every year. Distributions are cheaper, but set salary too low and you are asking for a letter. What ratio have you settled on, and has anyone here actually been challenged on it?

9 replies

I pay myself $24k on $310k of profit. CPA signed it. Zero issues in 4 years.
YoloOnIndexFunds · 7/9/2024
That is not a strategy, that is an unaudited return. 8% of profit as comp for an owner doing the actual work is indefensible the second anyone looks. "No issues yet" is not a defense, it is a sample size.
TaxGuyTom · 7/9/2024
lmao ok. every accountant on here thinks the IRS is a boogeyman they can bill you for. audit rates on S corps are under 0.5%.
YoloOnIndexFunds · 7/9/2024
Reasonable comp gets picked up in payroll matching and in every bank and buyer diligence too, not just exams. You are one loan app away from explaining this. Do what you want, it is your penalty.
TaxGuyTom · 7/9/2024
you are an idiot if you think a lender cares about my W-2 line vs my distributions. they look at cash flow. clearly never actually run a company.
YoloOnIndexFunds · 7/9/2024
Guys. He is right that lenders add back owner comp. He is also right that $24k is low. You can both be half correct and less rude about it.
jenn_from_provo · 7/9/2024
well this escalated. for the record I landed at $95k on ~$280k after pulling comp data for my role in SLC.
npm_install_life · 7/9/2024
Document how you picked the number. A one page memo with comp survey data has ended more of these conversations than any percentage rule of thumb.
definitelynotmyCPA · 7/10/2024
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u_wot_m8 · 7/12/2024