My taxes just came back from my accountant today. I will try and look and see what they did with my distributions on my taxes. I have a pretty top notch accountant and am an S-Corp.
My taxes just came back from my accountant today. I will try and look and see what they did with my distributions on my taxes. I have a pretty top notch accountant and am an S-Corp.
What is the "reasonable" wage?Originally Posted by tallen
What is a "reasonable" wage? Something that is not going to raise IRS suspicions that you are trying to skirt the system. Consider what the going rate is if you had to hire somebody to do the work that you do as the manager of your business. You might look for statistics on average salaries and wages for your industry (or similar industries) in your area. You don't have to pay yourself the top rate, but you do want to be close to the market range (at the bottom, not well below it).
One way to determine reasonable wage is as tallen suggested. Way back I took the smallest wage I could since I wanted to have as much money in the business to grow it as possible and my accountant told me I could not do that. I do have a dozen employees. My accountant tells me that I have to pay myself more than I pay anyone working for me. I think the number could vary on the size and profitability of the business and other factors. With very little information to go on I would suggest 50K to be about the smallest reasonable wage. More if you are in NYC, the Silicon Valley and etc.
Ray's $50K salary number works out to a wage of about $25 per hour (assuming 50 weeks at 40 hours/week). Obviously if your business is a side-line to your day job, or only a part-time commitment, or seasonal in nature, make appropriate adjustments (in which case an hourly wage might be more useful way to approach the problem).
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