06/03/2026
The More You Know
The IRS requires shareholder compensation to be in line with what someone performing similar work would earn in a comparable business.
If your salary is too low, the IRS may reclassify personal distributions as wages during an audit. This could result in back taxes, interest, and penalties.
Determining reasonable compensation isn't always straightforward, but getting it right can help reduce audit risk and keep your business compliant.
Have questions about your S-Corp compensation? TaxPG is here to help.