Not sometimes.Not “when cash flow improves.”Always.

Here’s why this matters in construction 👇Many contractors take little (or no) payroll and pull everything out as distributions to save on payroll taxes.

That is one of the IRS’s favorite audit entry points.

Underpaid or unpaid owner wages are often the first thing agents look for because:• It’s easy to spot• It creates back payroll taxes, penalties, and interest• Construction owners are hands-on, not passive investors

If you’re running jobs, managing crews, bidding work, or supervising projects — you’re not just an owner.You’re an employee in the IRS’s eyes.

What happens if you get it wrong?The IRS can reclassify distributions as wages, assess payroll taxes retroactively, and stack penalties on top.

TLDR:Reasonable comp isn’t about paying more tax — it’s about paying the right tax and staying off the audit radar.

If you’re an S-Corp contractor and unsure whether your salary would hold up under scrutiny, that’s a conversation worth having. https://accountingsolutionsllp.com/appointment/