Reasonable Compensation Studies - Guardian Tax Consultants

Reasonable Compensation Studies

Determining appropriate compensation is essential for businesses to ensure compliance with tax regulations and maintain equitable pay structures. A Reasonable Compensation Study evaluates the fair market value of services provided by employees or business owners, aligning compensation with industry standards and regulatory expectations.

Key Components

Role Analysis

Assessing the specific duties, responsibilities, and time commitment associated with each position.

Industry Benchmarking

Comparing compensation levels within similar industries and geographic regions to establish standard pay rates.

Economic Factors

Considering market conditions and economic variables that may influence compensation levels.

Benefits of Conducting a Reasonable Compensation Study

Regulatory Compliance

Ensures adherence to tax laws and minimizes the risk of audits or penalties.

Financial Planning

Provides a foundation for informed financial decision-making and strategic planning.

Equitable Compensation

Promotes fairness in pay structures, enhancing employee satisfaction and retention.

Implementing a Reasonable Compensation Study is a proactive step toward sustaining your business’s financial health and regulatory compliance

Resources & Citations

RCReports – Reasonable Compensation Services: https://rcreports.com/
IRS – S Corporation Compensation and Medical Insurance Issues: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues
Journal of Accountancy – Reasonable Compensation for S Corporation Owners: https://www.journalofaccountancy.com/issues/2014/sep/20149636.html
Forbes – Determining Reasonable Compensation for S Corp Shareholder-Employees: https://www.forbes.com/sites/forbesfinancecouncil/2018/06/01/determining-reasonable-compensation-for-s-corp-shareholder-employees/
The Tax Adviser – Reasonable Compensation for S Corporation Shareholder-Employees: https://www.thetaxadviser.com/issues/2016/sep/reasonable-compensation-for-s-corporation-shareholder-employees.html
National Association of Tax Professionals – Reasonable Compensation for S Corporation Shareholders: https://www.natptax.com/TaxKnowledgeCenter/FederalTaxInformation/Pages/ReasonableCompensation.aspx
American Institute of CPAs – Reasonable Compensation for S Corporation Owners: https://www.aicpa.org/interestareas/tax/resources/s-corporations/reasonable-compensation-for-s-corporation-owners.html
Tax Foundation – S Corporations and Reasonable Compensation: https://taxfoundation.org/s-corporations-and-reasonable-compensation/
CPA Practice Advisor – Determining Reasonable Compensation for S Corp Owners: https://www.cpapracticeadvisor.com/tax-compliance/article/10263064/determining-reasonable-compensation-for-s-corp-owners
Wolters Kluwer – Reasonable Compensation for S Corporation Shareholders: https://www.wolterskluwer.com/en/expert-insights/reasonable-compensation-for-s-corporation-shareholders
Accounting Today – IRS Focuses on Reasonable Compensation for S Corps: https://www.accountingtoday.com/news/irs-focuses-on-reasonable-compensation-for-s-corps
BNA Bloomberg – Reasonable Compensation for S Corporation Shareholders: https://www.bna.com/reasonable-compensation-s-n73014481286/
Thomson Reuters – Determining Reasonable Compensation for S Corporation Shareholders: https://tax.thomsonreuters.com/news/determining-reasonable-compensation-for-s-corporation-shareholders/
National Society of Accountants – Reasonable Compensation for S Corporation Shareholders: https://www.nsacct.org/blogs/nsa-blogger/2017/08/15/reasonable-compensation-for-s-corporation-shareholders
IRS – Independent Contractor (Self-Employed) or Employee?: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
IRS – Understanding Employment Taxes: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-employment-taxes
IRS – Employment Taxes for Small Businesses: https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-for-small-businesses
IRS – Self-Employed Individuals Tax Center: https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
IRS – S Corporations: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
IRS – Corporate Officers: https://www.irs.gov/businesses/small-businesses-self-employed/corporate-officers

: Reasonable Compensation Studies, Employee Compensation Analysis, Industry Benchmarking, Regulatory Compliance, Fair Market Value Compensation, Role Analysis, Economic Factors in Compensation, Financial Planning, Equitable Pay Structures, Compensation Evaluation