Underpaying yourself is the #1 reason S-Corps get audited—and it’s how contractors end up owing back payroll taxes, penalties, and interest years later.

A few reminders before year-end closes:

• “Reasonable compensation” is not the lowest salary you can get away with• High profits + low salary = 🚩 IRS red flag• Copying another contractor’s salary is not a defense• Keeping the same salary year after year while profits grow is risky• Payroll software does not protect you in an audit

The IRS looks at:• Your role and job duties• Hours worked• Company profits• Industry and location market data

If your 2025 profits are up and your salary hasn’t moved, now is the time to review it.You can still adjust payroll upward before year-end if needed—but once January hits, your options are limited.

TLDR:

S-Corps save taxes when they’re done right. They cost six figures when they’re not.

If you’re unsure whether your salary is defensible, this is a planning conversation—not a filing issue.

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