Avoid Costly Mistakes. Stay in Good Standing. Secure Your Financial Future.

The IRS requires that shareholder-employees of S‑Corporations be paid a reasonable salary for their services before taking distributions. This isn’t optional — it’s a compliance mandate. Underpaying may lead to costly IRS audits, reclassification of distributions as wages, and significant back taxes and penalties. Overpaying, on the other hand, increases payroll taxes and erodes the financial benefits of the S‑Corp model.

At Santana Consulting, we specialize in designing defensible, data-backed compensation plans that align with IRS guidelines, protect your tax advantages, and adapt with your business growth.

What We Do:

• Salary Benchmarking
  We base your compensation on market data and IRS factors — including your duties, time, experience, and industry standards — to determine an accurate and justifiable salary.

• Payroll Setup & Reporting
  We implement compliant payroll systems, handle tax withholding, and ensure accurate filing of all required forms (W-2, 941, 940) with both federal and state agencies.

• IRS Documentation & Support
  We maintain strong audit defense documentation—such as industry salary surveys, time logs, board resolutions, and compensation reports — to substantiate your salary rationale.

• Audit Risk Mitigation
  By positioning your salary appropriately and documenting your approach, we minimize red flags and reduce your IRS audit risk.

Why This Matters:

• Underpaying Risks:
  The IRS can reclassify distributions as wages, impose back payroll taxes, penalties, and interest, and negate S‑Corp benefits.

• Overpaying Penalties:
  Unnecessarily high wages increase payroll taxes and reduce eligibility for deductions like the Qualified Business Income (QBI) deduction, offsetting S‑Corp advantages.

Maintaining the right salary ensures your business retains financial benefits while staying fully compliant.

Who Should Use This Service:

• S‑Corp owners paying themselves through payroll and distributions

• LLCs that elect S‑Corp status to optimize taxes

• Business owners transitioning from sole proprietorships or partnerships

• Entrepreneurs seeking to balance tax planning with IRS compliance