Case Study

Accurate Reasonable Compensation Calculations Add Up to Additional Revenue for Firms and Payroll Tax Savings for Their Clients

Customer Profile

John Coleman, CPA, is the owner of Commonwealth Business Services in Fredericksburg, Virginia. The firm offers a wide variety of business services, specializing in tax preparation for individuals and businesses and small business accounting. Since signing up for RCReports, they’ve seen an increase in customer satisfaction as well as firm revenue.

Opening the Door to New Revenue Opportunity with Reasonable Compensation

For John Coleman and his team, keeping pace with new ways to provide added value services is a key part of keeping their firm’s revenue on a solid upward trend. New technologies are a key part of their strategy to accomplish this goal which is how John initially decided to implement RCReports in his firm.

“I was doing a ton of entity selection for small businesses transitioning from sole proprietorships or LLCs to s-corporations and I knew at that point I needed to find a better way to calculate reasonable compensation than using estimated numbers and manual spreadsheets,” said John. “I was introduced to RCReports about five years ago at a Virginia Society of CPAs meeting and I heard a speaker talking about how their firm used it and I immediately saw the value not only from a compliance and accuracy perspective for tax preparation, but also as an added value service that could open the door to entity planning and tax advisory services as just the starting point for increasing revenue through these services.”

Learn why RCReports is the #1 reasonable compensation tool for accountants.

A Simple Solution to a Common S-Corp Problem

“Being able to automatically generate a report and satisfy the requirements of the IRS for reasonable compensation inquiries is definitely a big timesaver for our firm and it also saves our clients a lot of money in payroll taxes, which increases our value as advisors in their eyes,” said John.

In fact, John regularly has clients remark that his firm is the first to have ever offered reasonable compensation advising as a service and one they definitely wish they had been offered by other firms they may have worked with. John says that many clients are completely sold on his firm once they have a reasonable compensation evaluation and can see that they’re saving money that essentially pays for his firm’s services.

“I had one client who was so thrilled with the money we were able to save them using RCReports that they proactively asked if they could leave us a positive Google review.”

John sees RCReports as an additional two-or three-fold revenue stream because it moves clients “off the fence about converting to an s-corp” which then leads to an additional s-corp tax return, entity planning engagement and tax planning engagement. Plus, chances are they’re going to be the only employee, so then we’re running payroll for them, which is yet another revenue source.”

According to John, $30,000 per year is the average reduction in salary that his clients see when he does reasonable comp calculations using RCReports. “That’s $4500 a year on FICA taxes. Almost every client we have done reasonable compensation for using RCReports, we’ve been able to cut their salary and save them money.”

The Reasonable Compensation Reward: More Revenue and Lower Payroll Taxes

For John Coleman, using RCReports as part of his entity and tax planning services has added a lucrative and highly-valued revenue stream to his firm and continues to support its revenue growth.

“Not only have we been able to save time and potential errors in calculating reasonable compensation, but RCReports has also allowed us to save our clients a lot of money, helping them avoid potential IRS issues and allowing them to leverage tax savings inherent to s-corporations,”John concluded. “In fact, RCReports actually saved me some money, too. I came home from work and told my wife that I had to cut my pay because now, using an accurate reasonable compensation number, I don’t have to pay as much in FICA taxes anymore.”

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