ScorpSalary Sherpa · a ScorpEase product
The IRS says your salary has to be reasonable. It has never said what that means.
If you own an S-Corp, you're required to pay yourself a reasonable salary before you take distributions. There's no published number, no formula, and no safe harbor to hide behind — but the IRS will tell you when it thinks you got it wrong, and by then it's arriving as back payroll tax, interest, and penalties.
Salary Sherpa gives you a number you can defend, and the documentation that defends it.
About 15–20 minutes. Delivered the same day. No spreadsheets, no guesswork, no surprises in the mail.
What's at stake
There are two ways to get this wrong, and both cost money.
The S-Corp savings are real. What comes with them is admin — and admin has a stinger. Most owners have heard about the first risk below; the second is the one quietly costing them money every single year.
The IRS reclassifies distributions as wages. You owe back payroll tax on the difference, plus interest and penalties — and once an examiner opens one year, the adjacent years rarely stay closed. Underpaying is the risk everyone has heard about.
Every dollar of salary above what's actually reasonable is a dollar you paid payroll tax on that you never owed. Rounding up isn't the safe choice — it's just the expensive one, repeated every year nobody re-examines it.
The defensible number is somewhere between those two, and where you land in that range is a judgment call. What separates a position that holds up from one that doesn't isn't the number itself — it's whether anyone wrote down how you got there. Do that in advance and there's no sting left to feel.
What you get
A report, not a calculator result.
A number on its own proves nothing. What makes a compensation position hold up is the reasoning attached to it — which is the part almost nobody has when they need it. No fluff — just the facts your CPA will actually appreciate.
A specific recommended number, and the reasonable range it sits inside — so you can see how much room you actually have.
Owners never do one job. The report separates the functions you actually perform, weights them by the time you give each, and prices them individually.
Comparable compensation for your roles, your industry, and your market — cited, so a reviewer can check the source rather than take your word for it.
Training and experience, duties, time devoted to the business, what comparable businesses pay, distribution history — the considerations the IRS and the courts actually weigh, answered one at a time.
How the number was reached, in plain language, so your CPA or an examiner can follow the reasoning without reconstructing it.
Formatted to go straight to your tax preparer or into your file. Contemporaneous documentation, dated for the year it was prepared.
How it works
Three steps, and one of them is yours.
Your background and credentials, what the business does, the roles you fill, and how your working hours actually divide across them. The last part matters most — it's what separates your report from a generic industry average.
Your answers go against current comparable wage data and the factors the IRS weighs when it evaluates owner compensation. A person reviews every result before it goes out.
Download it, keep it with your tax file, and send it to whoever prepares your return. If your salary needs to change, you'll have the reasoning to give your payroll provider.
What it costs
- Complete written compensation report
- Cited wage data for your roles and market
- Delivered the same day you submit
- Yours to keep, share, and file
More than one owner, or ownership across several entities? Get in touch — those get quoted together.
Common questions
The things owners ask before they order.
Can't my CPA just pick a number?
Many do, and plenty of those numbers are perfectly sensible. The issue isn't whether a number gets chosen — it's whether anyone wrote down why. A figure your preparer arrived at from experience is hard to defend later, because the reasoning lives in their head rather than in your file.
This is meant to work alongside your CPA, not around them. Most clients send the report straight to their preparer.
Do I need a new one every year?
Generally yes — your salary should track reality, and it rarely stays still. If your role changed, your hours changed, you hired people who took work off you, or revenue moved significantly, the study describing last year's business no longer describes this one.
A report from several years ago is better than nothing and weaker than something current. Most owners refresh when something material changes.
What if I've been underpaying myself for years?
The report establishes what reasonable looks like for the current year — that's what it's built to do, and it's the part you can still get right going forward.
What to do about prior years is a decision for you and your tax advisor. It depends on facts we don't see, and it's advice we're not in a position to give.
Will this stop me from being audited?
No, and be wary of anyone who tells you otherwise. Nothing prevents an examination.
What documentation changes is the position you're in if one happens. Reasoning prepared in advance and dated for the year in question is a different conversation than a number reconstructed after a notice arrives.
Is this tax or legal advice?
No. Salary Sherpa produces research and documentation. It doesn't file anything, doesn't represent you, and doesn't replace your CPA or attorney — it gives them something concrete to work from.
What if my situation is unusual?
Multiple owners with different roles, ownership held through holding companies, several entities under one group, or a business that doesn't fit a standard industry classification — those are common enough that we'd rather scope them properly than have you guess from the questionnaire. Get in touch first.
Salary Sherpa provides compensation research and documentation. It is not legal, tax, accounting, or investment advice, and no attorney-client or accountant-client relationship is created by ordering a report. Reasonable compensation is a facts-and-circumstances determination; a report supports your position but does not guarantee any particular outcome in an examination or proceeding. Consult your own CPA or attorney about your specific situation.
Twenty minutes now, or an explanation later.
The questionnaire takes about as long as one round of email with your accountant, and you'll have the report before the day is out.