Reasonable Compensation Engagement Letter for Clients

This customizable document includes both an engagement letter and a separate paragraph that can be added to your annual engagement letter.

Reasonable Compensation Issue Letter for Clients

These customizable letters explain the issues of reasonable compensation in layman’s terms. We have included two versions for your use:

Digital Delivery
This version includes hyperlinks to other relevant articles and materials. Use when you’re sending the letter via e-mail.
Paper Delivery
This version does not include any hyperlinks. You must print the letter and any supporting documentation before sending via traditional mail.

The Field Guide to Leverage Reasonable Compensation to Ignite Year-Round Advisory Revenue

Did you know that more than 60% of clients using a CPA or tax preparer want MORE advice from them? In addition, the top complaints that SMBs have about their accountants is a lack of guidance, too reactive, and they aren’t providing enough advice.
Reasonable compensation is a great way to introduce advisory services into your practice and help you create year-round revenue. Learn how in this eBook.

What is Reasonable Compensation? Flyer for Your Clients

Add your own logo and firm details to this in-depth overview of reasonable compensation to educate your S-Corp owner clients on the importance of taking a reasonable salary.

Preparer Penalty Check List & Stress Test

One of the best ways to protect yourself from preparer penalties is to use a check list and stress test your clients Reasonable Compensation against IRS and Court guidelines.

RCReports Interview Questionnaire

A simple form based Reasonable Compensation interview which can be printed or emailed to clients. Once complete, you can input the responses on behalf of your client.

Job Aid for IRS Valuation Professionals

Developed by a Team of IRS Valuation Professionals From the Large Business and International Division

David E. Watson, P.C, v. United States of America 2010 & Appeal 2012

The Watson case re-affirmed the IRS right to re-characterize some distributions as wages if they believe the Reasonable Compensation figure was not reasonable for the services provided

Sean McAlary Ltd, Inc. v. Commissioner of Internal Revenue 2013

A great case to look at and learn some of the methods the IRS uses to determine a Reasonable Compensation Figure and how the courts interpret some of their own guidelines to determine a Reasonable Compensation figure.

Glass Blocks Unlimited v. Commissioner of Internal Revenue 2013

This case reminds us to treat shareholder loans properly or they may be classified as distributions and be subject to Reasonable Compensation.

IRS Fact Sheet 2008-25 – Wage Compensation for S Corporation Officers

IRS Guidelines for determining Reasonable Compensation

IRS Who’s an employee?

RCReports Methodology Report

This report should be on hand if you are using an RCReports Reasonable Compensation Report in an examination or court setting to back up the methods used to determine a Reasonable Compensation figure

Brewer Quality Homes, Inc. v. Commissioner of Internal Revenue 2003

TReference this case for the ten factors considered by the courts in determining reasonable compensation. AKA the Ten Factor Test. Also used in Owensby & Kritikos, Inc. v. Commissioner.

LabelGraphics, Inc. v. Commissioner of Internal Revenue 1998

Reference this case for the five factors considered by the courts in determining reasonable compensation. AKA The Five Factor Test.

Summary of Court Factors used to ‘Stress Test’ Reasonable Compensation Figures:

A synopsis of three popular lists used to stress test reasonable compensation figures.
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