MYCPE ONE

S Corp Reasonable Compensation: IRS Audit Risks 1 Credit

S Corp Reasonable Compensation: IRS Audit Risks 1 Credit

  • Rating

    5

  • Published on

    October, 2026

  • Subject Area

    Taxes

Learning mode

On Demand
  • Access the course at your convenience
  • Take the assessment test
  • Get your certificate
  • Attend the live interactive session
  • Answer the polling questions
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Learning Objectives

  • Identify common myths about determining reasonable compensation for S corporation shareholder-employees.
  • Explain IRS criteria and court factors used to evaluate shareholder compensation.
  • Recognize audit risks associated with undocumented salaries and wage-distribution discrepancies.
  • Assess how historical compensation decisions may affect Social Security benefits.
  • Evaluate documentation and benchmarking practices that support a defensible salary rationale.
  • Identify potential preparer penalty exposure arising from unreasonable or omitted shareholder wages.

Course Overview

How defensible is an S corporation shareholder's salary when the IRS asks for evidence? Reasonable compensation decisions can create significant tax exposure when businesses rely on informal formulas, outdated wage figures, or unsupported assumptions. This course uses cautionary case stories to examine the consequences of inadequate compensation practices.

The course reviews IRS reasonable compensation principles, including services performed by shareholder-employees, comparable compensation, and factors considered by courts. It examines potential enforcement triggers, wage-versus-distribution discrepancies, third-party salary benchmarks, and documentation practices. Case examples illustrate how chronically low wages may affect Social Security benefits and how compensation adjustments can expose tax preparers to penalties and litigation.

Major Topic:

  • IRS reasonable compensation standards for S corporations
  • Common compensation myths and shareholder service factors
  • Enforcement indicators and wage-distribution discrepancies
  • Defensible salary benchmarking and documentation
  • Long-term Social Security effects of understated wages
  • Tax preparer penalties and compensation case studies

Participants will gain a practical perspective on reviewing shareholder compensation, documenting a defensible salary rationale, and recognizing risks before an examination. The course also introduces compensation-reporting tools and highlights why proactive review matters for S corporation clients and their tax advisers.

On Demand Credits for All Qualifications

License details Credits Status
Taxes for Certified Public Accountants (CPA-US) 1 CPE Approved
Federal tax-related matters for Enrolled Agents (EA) (Approval No. GEHNZ-T-03458-26-S) 1 CE Approved
Federal tax-related matters for Annual Filing Season Program (AFSP) (Approval No. GEHNZ-T-03458-26-S) 1 CE Approved
Federal tax-related matters for California Registered Tax Preparers (CRTP) (Approval No. 6273-CE-02900) 1 CE Approved
Federal tax-related matters for Oregon Registered Tax Preparers (ORTP) (Approval No. GEHNZ-T-03458-26-S) 1 CE Approved
Federal tax-related matters for Maryland Tax Preparer (MRTP) (Approval No. GEHNZ-T-03458-26-S) 1 CE Approved
Taxes for Delaware Licensed Public Accountant (DE-LPA) 1 CPE Approved
Federal tax-related matters for LTC (Approval No. GEHNZ-T-03458-26-S) 1 CE Approved
Taxes for Iowa Licensed Public Accountant (IA-LPA) 1 CPE Approved
Taxes for Maine Licensed Public Accountant (ME-LPA) 1 CPE Approved

Additional Information

Credit

1

Course Level

Intermediate

Instructional Method

QAS Self Study

Group Internet Based

Pre-requisites

None

Advance Preparation

None

IRS APPROVED

MY-CPE LLC, in accordance with the standards set forth in Circular 230 section 10.6, grants Continuing Education (CE) credits based on a 50-minute contact hour. As an IRS-approved CE provider, MY-CPE offers CE credits for Enrolled Agents (EA), Annual Filing Season Program (AFSP) participants, Tax Professionals, and Enrolled Retirement Plan Agents (ERPA), ensuring compliance with all regulatory requirements and supporting the maintenance of their professional credentials. (MY-CPE LLC 1600 Highway 6 South, Suite 250 Sugar Land, TX 77478, Email: support@my-cpe.com, Phone: 646-688-2884)

CTEC APPROVED

MY-CPE LLC, in accordance with the standards set forth in Circular 230 section 10.6, grants Continuing Education (CE) credits based on a 50-minute hour. MY-CPE LLC is approved by the California Tax Education Council (CTEC) to offer continuing education courses that count towards the annual continuing education requirement for CTEC Registered Tax Preparers. Additional information regarding registration as a tax preparer can be obtained by contacting CTEC at P.O. Box 2890, Sacramento, CA, 95812-2890, toll-free at (877) 850-2832, or by visiting www.ctec.org. (MY-CPE LLC 1600 Highway 6 South, Suite 250 Sugar Land, TX 77478, Email: support@my-cpe.com, Phone: 646-688-2884)

NASBA APPROVED

In accordance with the standards of the National Registry of CPE Sponsors, CPE credits have been granted based on a 50-minute hour.

MY-CPE LLC is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org. (MY-CPE LLC 1600 Highway 6 South, Suite 250, Sugar Land, TX 77478, Email: support@my-cpe.com, Phone: 646-688-2884)

Need to meet your Enrolled Agent (EA) Continuing Education (CE) requirements? MYCPE ONE has you covered. Our Online EA CE courses make it easy to earn credits while expanding your expertise in tax regulations and practices. Stay ahead with the latest updates and in-depth insights designed to keep you at the top of your field. With flexible scheduling and a user-friendly platform, MYCPE ONE offers a convenient, interactive learning experience. Start advancing your career today!

About Instructor

Paul Hamann

Paul Hamann

President, RCReports, Inc.

  • 4.7
  • rating
  • rating
  • rating
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Paul Hamann is a specialist in reasonable compensation for closely held business owners, with a strong reputation for educating tax advisors and valuators on the topic. Through his work and published writing in national and state journals, he has become a trusted voice in helping professionals determine appropriate compensation figures.


He founded RCReports in 2010, a cloud-based software platform used by CPAs, EAs, tax advisors, valuators, forensic accountants, and attorneys to calculate reasonable compensation for clients. Outside of work, he enjoys hiking Colorado’s backcountry and paddling scenic lakes and rivers with his wife and chocolate lab.

On Demand FAQs

What is Self Study (QAS)?

Self Study QAS (Quality Assurance Service) is a NASBA and other regulatory bodies approved program designed for Professionals to complete their Continuing Professional Education credits through self-paced, interactive courses that meet the highest standards of quality and compliance. Our courses qualify for credits with NASBA, IRS, CFP Board, HRCI, SHRM, Payroll Org, FP Canada, and 25+ other professional organizations.

How do I earn CPE credits through self-study?

To earn CPE credits, you must complete the self-study course, pass the required assessments, and submit the necessary documentation. Credits are awarded based on the completion of course hours and successfully passing the assessments.

Are the self-study courses accepted by NASBA and other professional organizations?

MY-CPE LLC courses are accepted for continuing education credit by various professional certification programs, including NASBA, IRS, CFP Board, and HRCI. MY-CPE LLC is also recognized by SHRM to offer Professional Development Credits (PDCs) for SHRM-CP® and SHRM-SCP® recertification activities.

What are the requirements to maintain compliance with self-study courses?

To maintain compliance, you must follow the guidelines set by NASBA and other regulatory bodies, which include completing the course within the specified timeframe, passing the assessments, and keeping accurate records of your learning activities.

How can I access my course completion certificates?

After successfully completing a self-study course and passing the assessments, you can access and download your course completion certificates from your account dashboard on our platform. These certificates are recognized by NASBA, IRS, CFP Board, HRCI, SHRM, Payroll Org, FP Canada, and 25+ other professional organizations for compliance and reporting purposes.

How are credits reported to governing bodies?

We issue instant credit certificates, ensuring they are valid for presentation to governing bodies. Typically, we report IRS, CTEC, CFP, IDFP, IWI, VBOA Ethics credits within 7 days – the fastest in the industry.

Reviews and Ratings

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JA

James Akoury, CPA (US)

5

the lecture was very informative

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S Corp Reasonable Compensation: IRS Audit Risks

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