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E
eebbca
December 9, 2022
Question

Single owner S corp reasonable salary if working part time

  • December 9, 2022
  • 1 reply
  • 0 views

I just created a single-member LLC for my consulting work and set it up as an S corp. I'm only consulting part time, and so would like the "reasonable salary" to reflect that. My questions are:

 

1) If Salary.com, Glassdoor, etc say that a full time equivalent salary would be $100k for my work, could I put my "reasonable salary" at $25k since I am only working 25% of the month?

 

2) If that answer to (1) above is "yes", then the remaining profits in the S corp available for distribution would result in a salary/distribution ratio lower than the rule-of-thumb 60/40, or even 50/50.... it would be more like 30/70. Does this create a problem with the IRS?

Thank you in advance for your replies. This forum truly is a terrific resource for fledgling entrepreneurs.
 

1 reply

J
JonpriL
December 9, 2022

Hi there, @eebbca.

 

Earning made as an S corporation entity comes with a lot of advantages when it comes to tax reporting. I have this link which may give you a rundown about the compensation in question: What is Reasonable Compensation for an S Corporation?

 

As the Community is a platform addressing all technicalities about QuickBooks, we're unable to provide any takes about your reasonable salary from working as a part-time individual. You'll want to contact the IRS and let one of the specialists know your situation.

 

Kindly read and use this article to learn more about how you can reach them: Internal Revenue Service Payroll Tax Compliance.

 

I'm a post away if you have any other QuickBooks concerns. I wish you continued success in all of your business ventures. Take care!

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