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Used by CPA’s, EA’s, Tax Advisors, Valuators, Forensic Accountants and Attorneys when they need to determine a Reasonable Compensation figure for a client. Whether for Tax Compliance, Normalization or Planning, RCReports has a report to fit your need.
Advisors
Are you a Tax Professional or Valuator? Get Started today and protect your clients.
Owners
Are you a business owner? Tap into the RCR network and protect your business.
Popular Insights
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W-2 or 1099 for Shareholder-Employees of S Corps? (33,124 Hits)Jan 01, 2022
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What if an S Corp Owner can’t afford to pay Reasonable Compensation? (22,681 Hits)Feb 01, 2022
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How to Stress Test a Reasonable Compensation Figure (9,852 Hits)Mar 01, 2022
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IRS lays out steps to keep Reasonable Comp challenges out of Tax Court (7,676 Hits)Apr 01, 2022
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Did the IRS Really Lose? Lessons from the Davis Case (5,537 Hits)Aug 01, 2019
About RCReports
RCReports provides instant and accurate insights into Reasonable Compensation for closely held businesses to ensure your clients remain compliant, minimize risk and realize maximum payroll tax savings. With in-built industry, legal, IRS criteria and salary data intelligence, tax advisors, valuators and forensic accountants gain access to credible and independent Reasonable Compensation calculations with guaranteed cover in the event of an IRS audit or litigation.
Access reports for planning, compliance or normalization within minutes through an intuitive, cloud-based platform, removing all guesswork and providing full documentation and transparency around your clients’ compensation.
FREQUENTLY ASKED QUESTIONS
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What The Experts Say
in minutes not days
client experience
and your clients
We synthesize a proprietary blend of IRS criteria, court rulings, geographic data and our Exclusive database of wages to...
Cost Approach
The Cost Approach breaks the duties of the business owner into its components such as company administration, accounting, finance...
Market Approach
Compares the business owner's compensation to compensation within the same industry. The market approach focuses as much as possible...
Income Approach
Seeks to determine whether a hypothetical investor would be satisfied with their return on investment when looking at the financial...
LATEST INSIGHTS
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What You Need to Win an IRS Reasonable Compensation Challenge
By Paul S. Hamann & Jack Salewski, CPA, CGMA This is a true story. Names & identifying details have been changed to protect the innocent. Nancy had a feeling that $40,500 was a good Reasonable Compensation figure for her as owner of Nancy’s Nail Salon. She didn’t have any facts or data to back it
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IRS lays out steps to keep Reasonable Comp challenges out of Tax Court
In a recent memorandum to its examiners and appeals agents, the IRS lays out steps to keep Reasonable Compensation challenges out of Tax Court. Great, you say, nobody wants to go to court!
Not so fast. The option of filing a petition in Tax Court provides taxpayers with time and leverage. By following the steps in this memo, IRS examiners can prevent taxpayers who cannot reach a resolution on Reasonable Compensation from filing a petition in Tax Court. This means:
1. Tax must be paid now. When filing a petition with the Tax Court, taxpayer can avoid paying the tax until the matter is finally resolved.
2. Leverage Lost. Filing or even the threat of filing a petition with the Tax Court can give taxpayers and their advocates’ leverage to get the appeals agent to settle the dispute favorably. -
How to Stress Test a Reasonable Compensation Figure
Stress testing a reasonable compensation figure is simple. The courts have listed the factors they consider when determining whether a reasonable compensation figure is indeed reasonable. We can use those factors to “stress test” any reasonable compensation figure.
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What if an S Corp Owner can’t afford to pay Reasonable Compensation?
This is by far the number one question we receive, and the answer is both simple and complex. Why? Because the amount of Reasonable Compensation actually paid is tied to distributions, not profit or loss.
Depending on the company’s financial condition and business strategy, a shareholder-employee may be able to take Reasonable Compensation plus a distribution, just Reasonable Compensation, or neither. What the shareholder-employee can’t do take a distribution instead of Reasonable Compensation.
To help you better understand, let’s run through a few simple scenarios and then move onto some more advanced ones. Keep in mind the following:
