Free educational tool · Business

Reasonable Compensation Planner

Compare a proposed salary with documented duties, time, revenue sources, and an external market range.

Tax year Current facts · Last reviewed 2026-07-29 · Inputs stay in your browser

Business · Educational Decision Engine

Reasonable Compensation Planner

Organize the facts used to support shareholder-employee compensation. No formula, percentage, or public calculator can declare a salary reasonable.

Business profit before owner salaryUse a consistent annual estimate.

Proposed annual W-2 salaryThis entry is not treated as reasonable merely because it was entered.

Documented market-range lowUse credible third-party compensation data for comparable duties and geography.

Documented market-range highThe range should match role, experience, hours, and location.

Owner hours per weekInclude production, management, administration, and sales time.

Primary source of gross receiptsIRS guidance focuses on what generated the receipts.

Expected non-wage distributionsDistributions do not establish the correct salary.

Duties and responsibilities are documentedDocument production, management, administrative, and strategic work.Market compensation sources are retainedKeep the source, date, geography, role match, and adjustments.Non-owner employees materially generate revenueTheir contribution may affect the owner-service analysis.

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Reasonable Compensation Planner

Reasonable Compensation Planner

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Use this result to prepare for professional review—not to take a filing or transaction position.