HearthRC Defense
The reasonable compensation intake.
The working questionnaire for an S-corp comp engagement. Your firm completes it about the client, one intake per client, saved to your account as you go so anyone at the firm can pick it up later. Gaps are fine. Submit what you have and the engagement flags the rest.
A free account keeps each client's intake saved and resumable. Create one, or sign in if the firm already has one.
Why this matters
The defense is the documentation, not the number.
A shareholder-employee performing more than minor services must be paid reasonable compensation before distributions (IRC §3121(d)(1); Rev. Rul. 74-44). When the salary is too low, the IRS can recharacterize distributions as wages and assess back payroll taxes. The controlling case, Watson v. United States (8th Cir. 2012), endorsed valuing the owner's services task by task, and IRS Fact Sheet FS-2008-25 lists the nine factors examiners weigh.
There is no safe harbor and no statutory percentage. What holds up is documentation: who does what, for how many hours, valued against the right labor markets. This intake gathers the facts that documentation is built from.
Before you start
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This intake is a professional working tool for gathering the facts that support a reasonable compensation determination. It is not legal or tax advice and it creates no safe harbor. Final positions are reviewed by the engagement's qualified tax professional.