S Corporations Part 2: Determining Reasonable Compensation
Author: Greg White
| CPE Credit: |
2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC |
Determining reasonable compensation for S corporation shareholder-employees is one of the most critical—and often misunderstood—issues in tax planning. Paying too little can trigger IRS audits and severe penalties, while paying too much can unnecessarily increase payroll taxes. In this course, tax expert Greg White, CPA, will walk you through practical methods for calculating reasonable compensation, review key court cases, and explain how to avoid costly mistakes. You’ll also learn how shareholder loans can increase basis and what strategies work (and which don’t).
Join us and gain the tools to confidently advise clients and keep them compliant.
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2028 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN cardPublication Date: February 2026
Topics Covered
- Reasonable compensation for shareholder-employees
- The types of debt that provide basis to shareholders
- How to avoid S corporation “knuckleheads”
Learning Objectives
- Identify methods to determine reasonable compensation
- State the difference between payroll taxes imposed on partners vs. those imposed on S corporation shareholders
- State why paying too little compensation to a shareholder can result in terrible consequences later in life
- Recognize how to restructure loans to provide basis to a shareholder
- Identify the strategy suggested to prevent “S corp knucklehead” outcomes where minority shareholders are “frozen out”
Level
Basic
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
None
Advance Preparation
None
