Reasonable Compensation According to the IRS
Tip
If a client gives you a hard time about reasonable compensation, give them the IRS publication linked above to validate the need for reasonable compensation.
Discover the IRS's definition of reasonable compensation, an issue that can be important to both employers and employees.
The Internal Revenue Code establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes. S corporations should not attempt to avoid paying employment taxes by having their officers treat their compensation as cash distributions, payments of personal expenses, and/or loans rather than as wages.