Reasonable Compensation Estimator
Women's Wealth Collective · planning tool for S-corporation officers
About you and your role
Role & industry
Location
Major = NYC, SF, LA, Chicago, Boston, etc.
For your reference — not used in calculation
Time & experience
years
hrs/wk
Average over the year, including admin work
Your reasonable compensation range
Planning purposes only. This is a heuristic estimate based on role, geography, experience, and hours — not a salary survey or appraisal. Actual reasonable compensation depends on the specific facts and circumstances of your business. For audit defense, obtain formal documentation through a qualified tax professional or independent valuation specialist.
Low end
—
25th-percentile comparable
Recommended
Median estimate
—
—
High end
—
75th-percentile comparable
How the median was built
| Factor | Multiplier | Running median |
|---|
The three IRS-recognized approaches
Courts and the IRS generally evaluate reasonable compensation using one or more of these approaches. This tool primarily uses the Market Approach, with a Cost Approach overlay (hours and role-replacement logic).
1
Cost Approach Partial
What would the business have to pay to replace the officer with someone of comparable skill? Looks at the cost of hiring out each function the officer performs (management, sales, technical work, admin). Often used for hands-on owners who wear many hats.
2
Market Approach Primary
Comparable salaries for similar roles in similar companies in similar geographic areas. Uses BLS data, salary surveys (Robert Half, Salary.com, RC Reports), and benchmarks for industry, region, and experience level. This is the most common approach in IRS audits and the one this tool is built around.
3
Income Approach
Compensation calculated as a share of the value the officer creates — typically based on business profits, return on investment to the shareholder, or revenue produced. Useful for businesses with intangible-asset-driven profits. Requires deeper financial analysis than this tool models.
Documentation to keep — for audit defense
✓
Written compensation analysis
A formal memo each year documenting how the salary was determined, citing the data sources used (RC Reports, Salary.com, BLS, industry surveys).
✓
Role description & hours log
A clear description of duties performed, percentage of time on each, and total hours devoted to the business per week.
✓
Salary comparison data
Printouts or PDFs of comparable salaries from at least 2–3 independent sources, dated and saved with the year-end records.
✓
Board / shareholder minutes
Formal minutes documenting the board's approval of the officer's salary for the year, even for a one-person S-corp.
✓
Payroll records
W-2s, Form 941 quarterly filings, payroll tax deposits, and gross-to-net pay calculations — actually paid as wages, not just booked.
✓
Business performance context
P&L statements and KPIs showing what the business produced under the officer's leadership — supports both market and income approaches.