Protect Your S-Corp. Stay IRS-Compliant. Maximize Your Tax Efficiency.

The IRS requires that shareholder-employees of S-Corporations pay themselves a reasonable salary for the work they perform. This isn’t just a recommendation — it’s a compliance issue. Failing to meet this requirement can result in severe consequences, including IRS audits, reclassification of income, penalties, and additional payroll tax liabilities.

Unfortunately, most S-Corp owners don’t fully understand what qualifies as “reasonable,” leading them to either underpay themselves (risking enforcement action) or overpay (resulting in excessive payroll taxes and reduced distributions). Both mistakes can cost you thousands of dollars annually.

At Santana Consulting, we specialize in helping business owners determine, document, and maintain reasonable compensation that aligns with IRS guidelines and protects your S-Corp tax advantages.

What We Do:

Our Reasonable Compensation Planning includes:

• Salary Benchmarking
  We use national labor data, IRS standards, and your actual job duties to calculate a fair, defendable wage based on your industry, experience, and business structure.

• Payroll Setup & Tax Reporting
  We set up compliant payroll systems, issue W-2s, and handle required federal and state filings (Forms 941, 940, and others), ensuring accuracy and on-time compliance.

• IRS Documentation Support
  We prepare and retain supporting documents that demonstrate how your compensation was determined, strengthening your defense in the event of an audit.

• Audit Risk Reduction Strategies
  Our approach helps minimize your audit exposure by aligning your salary and distributions properly, avoiding red flags like low or inconsistent payroll.

Why This Matters:

Underpaying yourself can result in:

• IRS reclassification of distributions as wages

• Back taxes, penalties, and interest

• Loss of S-Corp tax benefits

Overpaying yourself can lead to:

• Unnecessarily high payroll tax obligations

• Lower business profits and reduced cash flow

• Missed opportunities for legal tax savings

By working with Santana Consulting, you’ll ensure that your compensation plan is legally defensible, financially efficient, and fully compliant with IRS expectations. You get peace of mind knowing you’re doing it right — and protecting your business from future problems.

Who Needs This Service?

• S-Corp owners paying themselves a salary or taking distributions

• LLCs electing S-Corporation tax status

• Entrepreneurs converting from sole proprietorships or partnerships

• Business owners looking to optimize tax strategy and reduce audit risk