Discussion:S corp "reasonable" salary

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Discussion Forum Index --> Basic Tax Questions --> S corp "reasonable" salary
Discussion Forum Index --> Tax Questions --> S corp "reasonable" salary

Brewbob1231 (talk|edits) said:

3 July 2008

Here is my story. My brother and I own a Florida construction company setup as an S corp. We currently have approx 3.5m in the bank. Our salaries for the past 3 years has been over 80k each. 80% of the 3.5m has been accumulated in 2006, 2007, & 2008. We have been in business for 13 years. We have never taken any distributions that amount to anything maybe 10k a year for 2 or 3 of the 13 years. We need to take distributions to eliminate any creditor exposure should the worst happen. So we are going to take out all but maybe 350k in the form of distributions. Our CPA wants us to raise our salary to at least 150k each to make sure that we pass the IRS reasonable test. I have read a bunch of opinions on this site regarding this matter and it seems to me that the general concensus is that the shareholders salaries, if they are employed in the business, should at least match what the industry average is. The best I can tell from some of the employment websites we are above the industry average pay rates. Your opinion in this matter is greatly appreciated. Thank you for your time.

Death&Taxes (talk\|edits) said:	3 July 2008
Here are over 300 different points of view. Discussion: S Corp Owner Salary vs. Distributions

JR1 (talk\|edits) said:	July 3, 2008
But yes, I agree with you Brewbob. The foundation are the court cases on the issue, nothing else. There are other factors, but comparable pay is a huge one.