S corporation compensation is one of the highest-risk, highest-reward areas in small-business tax planning. Set the salary too low, and you invite IRS reclassification of distributions as wages triggering back taxes, penalties, and interest. Set it too high, and you erode the very tax savings the S corp structure was meant to deliver.
This course cuts through the ambiguity with a practical, advisor-focused roadmap. You’ll walk through side-by-side comparisons of wages vs. distributions, dissect major court cases that define “reasonable,” and decode the IRS’s own enforcement playbook. We’ll also cover the three accepted valuation approaches (Cost, Market, Income), show you how to use the IRS Job Aid effectively, and demonstrate how to document your position so it holds up under audit pressure.
Whether you prepare S corp returns, advise owner-employees, or manage compliance for a firm, this session gives you the tools to build defensible, audit-ready compensation strategies that balance tax efficiency with compliance safety.
Learning Objectives:
Identify the IRS’s core requirements for treating S corporation shareholder-employee payments as “reasonable compensation” rather than disguised distributions.
Analyze landmark court decisions (Watson, McAlary, Glass Blocks, and others) and recent enforcement patterns shaping how the IRS challenges S corp officer pay.
Evaluate how the interplay of wages, distributions, profitability, and shareholder withdrawals influences audit risk and reasonable compensation exposure.
Assess the IRS’s official guidance including the Job Aid and the key factual factors used to build a defensible compensation figure.
Apply the three valuation frameworks (Cost, Market, and Income approaches) to real-world S corp compensation scenarios.
Explain best-practice documentation strategies corporate minutes, compensation studies, payroll records, and stress tests that withstand IRS scrutiny during an audit.
Key Topics Covered:
Wages vs. Distributions: When does a distribution cross the line into unreasonably low compensation?
Key Court Cases: Lessons from Watson, McAlary, Glass Blocks, and other precedent-setting rulings.
IRS Guidelines & Criteria: Decoding the Job Aid and the 8–10 factor test for reasonableness.
Profitability & Withdrawals: How business earnings and shareholder draws influence IRS risk scoring.
Enforcement Trends: What recent audit data and TIGTA reports reveal about IRS priorities.
Valuation Approaches: Applying Cost, Market, and Income methods to S corp compensation.
Documentation & Defense: Building an audit file with minutes, studies, payroll logs, and stress-tested scenarios
Credits and Other information:
Recommended CPE credit – 1.5
Recommended field of study – Taxes
Session Prerequisites and preparation: None
Session learning level: Basic
Location: Virtual/Online
Delivery method: Group Internet Based
Attendance Requirement: Yes
Session Duration: 90 minutes
Who Should Attend:
CPAs
Enrolled Agents (EAs)
Tax Professionals
Attorneys
Tax Preparers
Finance Professionals
Financial Planners
About Our Speaker :
Paul Hamann , CPA
Tax Director
Paul Hamann is a nationally recognized authority on reasonable compensation for closely held business owners. He has built a strong reputation teaching tax advisors, valuators, and forensic accountants how to determine defensible compensation figures for S corporation and other pass-through entity owners. His articles and commentary have appeared in leading national and state tax and valuation journals, establishing him as a go-to expert for practitioners navigating IRS scrutiny.
