Reasonable-comp documentation, accountable-plan reimbursements, and shareholder-distribution tracking — the three things every S-Corp owner gets audited on, done by a CGMA-supervised team.
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The S-Corp election exists for one reason: to split owner income between W-2 wages (subject to payroll tax) and shareholder distributions (not subject to SE tax). Get the split right and you save 7.65% to 15.3% on the distribution portion. Get it wrong and the IRS recharacterizes distributions as wages, hits you with back payroll tax, penalties, and interest — the leading cause of S-Corp audit assessments. The right split is governed by "reasonable compensation" — a facts-and-circumstances test based on your role, hours, industry, and comparable salaries. Most $300/mo bookkeepers never touch this conversation; they post your W-2 and your distributions and leave the audit risk to you. We document a reasonable-comp position annually using RCReports or comparable-salary data, structure an accountable plan for owner reimbursements (home office, mileage, phone) that keeps those expenses tax-deductible to the corp and tax-free to you, and track shareholder basis so your eventual distribution treatment holds up. 1-800Accountant ranks #1 on this query with a thin page; the SERP is winnable on substance alone.
These are the niche-specific issues a generic $200/mo bookkeeper either misses or charges extra for.
Reasonable-compensation gets recharacterized in audit when there is no documented analysis — back payroll tax + 100% accuracy-related penalty is the standard outcome
Accountable-plan reimbursements (home office, auto, phone) require a written plan and substantiation; without it, those reimbursements are taxable wages
Shareholder basis tracking is on the owner, not the IRS — distributions in excess of basis become capital gain and most S-Corp owners cannot produce a basis schedule on request
Health insurance for >2% shareholders must be added to W-2 wages but is not subject to FICA — generalist payroll providers miss this every January
1-800Accountant dominates the SERP with thin pages that bury the actual S-Corp specifics — reasonable compensation, accountable plan reimbursement, distribution vs salary mechanics — behind "we file your 1120-S" generalist copy. Their bookkeeping is a $419 Enterprise upsell, not an entry-tier offer.
| Provider | Monthly | Focus | Notes |
|---|---|---|---|
| Tax-first; bookkeeping bundled at Enterprise tier only | |||
| Solopreneur S-Corp formation + books | |||
| Monthly close, generalist | |||
| Reasonable-comp study + accountable plan + basis tracking, CGMA-supervised |
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We commission an annual RCReports analysis (or equivalent) using your role, hours worked, industry NAICS code, and geographic region. The output is a documented compensation range with comparable-salary data — not a guess. Your W-2 is set inside that range, and the documentation lives in your file in case the IRS asks. For owner-operators in low-margin industries we sometimes set wages at the lower end with documented business-cash-flow justification; for high-distribution years we err higher. Either way, the position is defensible.
An accountable plan is a written corporate policy that lets your S-Corp reimburse you for business expenses (home office, mileage, cell phone, internet) tax-free, while the corp still deducts them. Without a written plan and proper substantiation, those reimbursements are taxable wages — you pay income and payroll tax on money that should have been free. We draft the plan at onboarding, set up a monthly reimbursement workflow in Expensify or Ramp, and reconcile reimbursements against substantiation each month so the deductions hold up.
S-Corp shareholders owning more than 2% must have employer-paid health insurance added to W-2 Box 1 wages — but it is NOT subject to Social Security, Medicare, or unemployment tax. You then deduct it as a self-employed health insurance adjustment on your personal 1040 Schedule 1. Generalist payroll providers either miss the W-2 add-back (you lose the deduction) or include it in FICA wages (you over-pay payroll tax). We coordinate with your payroll provider every December to get the Box 1 add-back right.
No — we are a bookkeeping and management-accounting firm, not a tax prep firm. We close your books, document reasonable comp, maintain your accountable plan, and produce a year-end binder (trial balance, basis schedule, AAA reconciliation, distribution log) that your tax preparer uses to file the 1120-S quickly and accurately. If you do not have a tax preparer, we refer to a vetted partner network. The honest version: bookkeeping and tax prep are different jobs done well by different people.