IRS-defensible reasonable comp memo for S-Corp shareholders — $495 flat. RCReports data + CGMA review.
Order This Service →No retainer · ACMA CGMA reviewed · Annual (or whenever your role/duties/compensation changes materially)
S-Corp shareholder-employees must pay themselves 'reasonable compensation' subject to FICA before taking tax-free distributions. The IRS audits this regularly — failing to document reasonable comp is one of the top S-Corp audit triggers. Most CPAs add this to year-end accounts for $400-$1,200. We do standalone reasonable comp reports at $495 flat: RCReports market data analysis + CGMA-reviewed memo + 15-minute review call. Three audit-defense bullets included as standard.
Existing S-Corp shareholder-employees who don't have documented reasonable comp
Your CPA never documented reasonable comp and you're worried about an IRS audit
You took a $200K distribution + $30K salary and a friend in tax just told you that's an audit flag
You're considering reducing your salary to take more distributions but don't know what's defensible
You just elected S-Corp and need the reasonable comp documentation from day 1
| Option | Price | Pros | Cons |
|---|---|---|---|
| DIY via BLS data | $0 | Free | Not IRS-defensible without proper methodology; high audit-loss risk |
| CPA add-on to year-end | $400-$1,200 | Bundled with tax filing | Variable quality; often basic; not used unless prompted |
| BlackpeakCFO | $495 flat | RCReports data + CGMA review + pre-drafted audit defenses | Bundle with the $395 S-Corp Election Package if you're just electing now ($790 vs $890 separately) |
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Annually is the gold standard. Minimum: whenever your role/responsibilities or compensation changes materially. The IRS looks at the year of the alleged underpayment, so if you're audited for 2024, you want documented reasonable comp dated within or before 2024.
You're at audit risk. The IRS can reclassify "distributions" as wages — meaning back-FICA + payroll penalties + interest. Our memo identifies the gap and recommends a corrective plan: bringing salary up over 2-3 years to defensible levels.
No — you cannot pay yourself reasonable comp if there's no profit to pay it from. The memo for a loss year would document the financial constraint that made reasonable comp impossible. This IS defensible to the IRS.
Yes. We document each role separately and aggregate. The "reasonable comp" for a hybrid role is the market rate for the time-weighted blend of duties. RCReports has data for hundreds of roles to support this.