How the IRS views owner salary, and how to set a defensible number that still saves payroll tax.
Why it matters
S-Corp owners save self-employment tax on distributions, which is exactly why the IRS scrutinizes salaries that look too low.
What makes a number defensible
Market data for your role, hours, and the business's ability to pay all support a reasonable figure.
Document the decision
A short memo with your methodology is the best defense if the question ever comes up in an examination.
This article is general information, not tax advice. Every situation is different. Talk to your advisor before acting.
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- #payroll
