RCReports - Reasonable Compensation

Reasonable compensation issues don’t show up gradually. They show up all at once.

In most firms, RC only comes up:
→ During tax season
→ In “we’ll deal with this later” notes
→ With inconsistent follow-through

And then it disappears.
The firms that are getting it right have turned reasonable compensation into a repeatable service, not a scramble.

Join Nick Persichetti, Paul S. Hamann, and George Abdelmessih to learn how forward-thinking firms are doing exactly that 👇

📆 Apr 23
⌚ 2:00 PM ET

👉 Reserve your seat

Financial Cents & RC Reports: Task To Annual Service Reasonable Compensation Workflows | Financial Cents Join us for this free webinar and learn how to turn Reasonable Compensation from a one-off task into a repeatable annual service with clear workflows, pricing and delivery.

🚨 “It’s never happened to me” is not a defense in an S Corp audit.

We saw a case where a shareholder took:
❌ $0 in reasonable compensation
❌ $45,000 in distributions

The IRS response?

✅ Reclassified distributions as wages
✅ Assessed payroll tax + penalties (~$20K)
✅ Opened the door to auditing additional years

This isn’t rare anymore.
The IRS is actively targeting S Corps with low (or no) compensation and high distributions.

If you can’t defend the number, you’re exposed.

➡️ Read the full breakdown of what went wrong:

This S Corporation Was Audited—Here’s What Went Wrong Learn from a real case where ignoring reasonable compensation led to costly IRS penalties.

Join us tomorrow for Profit Machine Live where RCReports, Paul Hamann, will be speaking about how to Transform your tax practice Into a profit machine with 5 scalable revenue streams and a bonus session on how to sell it all.

👉 REGISTER HERE: https://tinyurl.com/mu2b7me6

More details:

In this session, Paul Hamann explains how accounting and tax firms can add Reasonable Compensation Reports as a high-ticket, advisory-driven revenue stream. Attendees will learn how these reports—often priced between $1,000–$2,500 per engagement—can move beyond a compliance requirement and become a strategic advisory service for S-Corp clients.

This session is ideal for firm owners looking to increase revenue per client while providing defensible, value-driven guidance that supports long-term client outcomes.

Here’s what you’ll discover:
✅ What Reasonable Compensation is and why it matters for S-Corp clients
✅ How Reasonable Compensation Reports create a high-margin revenue stream
✅ Typical pricing models and positioning strategies How to frame
✅ Reasonable Compensation as advisory—not just compliance
✅ Where this service fits naturally within an existing tax or advisory workflow

On January 29th join us for Profit Machine Live! A one-day virtual summit for accountants and CPAs.

Profit Machine Live! brings together 6 industry experts to break down 5 scalable revenue streams accounting firms are using to grow beyond tax season... plus how to sell it all.

You’ll hear expert-led sessions on:
📌 Tax Advisory
📌 IRS Representation
📌 High-Ticket Advisory
📌 Reasonable Compensation
📌 Client Advisory Services (CAS)

Practical education, real strategies — with up to 6.0 CPE credit hours available as a bonus.

👉 Save your free spot: https://profitmachinelive.com/?utm_campaign=3NY37QJ&utm_source=RC-Reports&utm_medium=partners

🚨 IRS CP261 Update: This isn’t just a confirmation letter anymore.

If you work with S Corps, you’ve seen the CP261 notice for years.
But in late 2023, the IRS added new language that’s basically a reasonable compensation warning — and it’s not optional.

Here’s what accountants should know:
✅ CP261 now reinforces that shareholder-employee pay must be reasonable wages
✅ The IRS can reclassify distributions as salary
✅ Ignoring it can mean back payroll taxes, penalties, and interest
✅ “60/40” isn’t a real rule — documentation is everything

If you can’t defend the number, you’re exposed.

➡️ Read the full breakdown + what to tell clients:
https://rcreports.com/blog/irs-cp261-update-what-accountants-should-tell-their-s-corp-clients/?utm_medium=organic-social&utm_source=facebook&utm_campaign=blog-irs-cp261-update

IRS CP261 Update: What Accountants Should Tell Their S Corp Clients If you work with S corporations, you’ve probably seen the CP261 notice—the IRS letter confirming an S election. For years, it was a simple acknowledgment. That changed in late 2023. The IRS added language about reasonable compensation, and it’s not just a suggestion. It’s a compliance warnin...

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Each reasonable compensation report you’ll receive:
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Don’t let last year’s wages haunt this year’s return.
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If you can’t show your work, the past comes back.
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