Set an owner salary with market context.
If you run an S-corp, the IRS expects a reasonable W-2 salary before distributions. PeerBasis benchmarks your role against federal wage data and helps you record the market evidence and role-specific factors considered.
Underpay your salary, and the IRS can reclassify your distributions.
An S-corp owner-employee must take reasonable compensation as W-2 wages before non-wage distributions. Pay too little, and the IRS can recharacterize distributions as wages — with back payroll tax, penalties, and interest. A contemporaneous record shows the wage benchmark and business facts considered when the salary was set.
From your role to a documented salary, in three steps.
Your role and region
Pick your occupation, state, and weekly hours. Add a metro or rural region and an industry if useful.
See the market band
See published metro, rural-region, or statewide wages, with any fallback explained. Add national industry wages as a separate comparison.
Record the decision
A dated memo with the wage basis, the IRS reasonableness factors, and draft language to review for your Form 1120-S records.
Built on federal wage data — sources and transformations stated.
The benchmark uses published U.S. Bureau of Labor Statistics OEWS wages for your occupation. We use the selected metro or nonmetropolitan-area wage band when available, then statewide wages. Any remaining fallback to a 2024 BEA Regional Price Parity proxy or national wages is labeled. For effort below 40 hours, annual wage percentiles are scaled linearly; they are not observed part-time wages.
This addresses one market-evidence factor in a reasonable-compensation analysis: what comparable businesses pay for similar services.
- OEWS reports straight-time gross pay and certain cash incentives for wage and salary workers; it excludes employer benefit costs and is not a measure of total compensation.
- An occupation (SOC) code is a proxy for your role, not an exact match; pick the closest and document it.
- Industry comparisons use national private-industry wages. We keep them separate from regional wages; we do not construct an unsupported local industry estimate.
- Reasonable compensation also depends on facts only you know — qualifications, duties, and time devoted.
Free to preview. $19 for the documentation memo.
See where your salary lands — for any occupation and state.
- ✓ Your market-wage band and estimated percentile position
- ✓ Regional wages and an optional national industry comparison
- ✓ The methodology and BLS sources
A dated PDF for your records — everything in the preview, plus:
- ✓ The IRS reasonableness-factor worksheet
- ✓ Draft determination language to review for Form 1120-S records
- ✓ The full wage-basis table, dated and sourced
- ✓ A downloadable PDF to keep with the corporation's compensation records
One-time fee; no subscription. Keep the dated PDF with the corporation's compensation records.
Frequently asked
What is reasonable compensation for an S-corp owner?
An S-corporation shareholder who works in the business is an employee and generally must receive reasonable compensation as W-2 wages before non-wage distributions. Among the relevant facts are training and experience, duties and responsibilities, time devoted, and what comparable businesses pay for similar services; no single factor is conclusive. PeerBasis benchmarks the market-pay input against U.S. Bureau of Labor Statistics wage data for the selected occupation and geographic basis.
Why does it matter — what's the risk?
If an S-corp owner pays little or no salary while taking large distributions (which avoid payroll tax), the IRS can recharacterize those distributions as wages and assess back payroll taxes plus penalties and interest. A contemporaneous, data-backed reasonable-compensation determination records the facts and market evidence considered when setting the salary.
Where does the wage data come from?
The U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics (OEWS) program. PeerBasis uses published metro, nonmetropolitan-area, or statewide wages when available, and identifies any fallback to a broader geography or a BEA price-level proxy. You can also add a separate national private-industry comparison; it is not combined with the geographic estimate.
Is this tax or legal advice?
No. PeerBasis provides wage benchmarking data and a documentation template to support a good-faith reasonable-compensation determination. It is not tax or legal advice; consult your CPA or tax advisor on your specific facts.
What if I do several jobs in my business?
Most owners wear multiple hats. Pick the occupation that best captures the bulk of your hours, and prorate for the share of full-time effort you actually devote. Each preview and memo covers one occupation. For a blended role, run separate previews and ask your CPA or tax advisor how, if at all, to weight them.
What does it cost?
The wage band, percentile, and methodology are free to preview for any occupation and state. The downloadable memo — with the IRS-factor worksheet and draft record language to review for your Form 1120-S records — is a flat $19.
Find a salary you can document.
Preview your wage band free in under a minute; $19 for the documentation memo.