How to Pay Yourself as an S Corp Owner: Reasonable Compensation & Payroll Setup – Ep. 212

So you've made the leap and elected to become an S Corp—congratulations! Now what? One of the most crucial (and often confusing) steps is figuring out how much to pay yourself through payroll. In this episode, Danielle Hayden, CEO and founder of Kickstart Accounting, Inc., is joined by Kickstart's Lead Account Manager, Kelsey Chester, to break it all down for you, from finding a payroll provider to understanding "reasonable compensation" and how to stay compliant with the IRS.

They also dive into the common missteps business owners make as S Corps, seasonality in your income, and why treating yourself like the CEO of your business is instrumental to its success. If you've ever wondered how to balance paying yourself and taxes as an owner, this episode is for you!

Key Takeaways:

• What is "Reasonable Compensation": What factors the IRS considers to calculate a "reasonable" salary, and how to determine how much to pay yourself to stay tax compliant.

• Payroll Setup: How to set up payroll, even if you're a solo business owner, and choose the right provider.

• Payroll vs. Owner's Draws: The differences between payroll wages and owner's draws, and how each impacts your taxes.

• Financial Stability: Navigate and plan for seasonal fluctuations in revenue so you can maintain consistent paychecks and avoid cash flow issues.

• Year-End Tax Planning: Avoid the mistake of waiting until the end of the year to pay yourself, and how to proactively plan to reduce tax stress.

Topics Discussed:

Payroll Setup and Payroll Providers (00:0:48 – 00:04:49)

How to Determine "Reasonable Compensation" (00:05:13 – 00:07:39)

Paying Yourself a Stable Salary and Planning for Taxes (00:09:26 – 00:12:37)

CEO Mindset and Paying Yourself What You Deserve (00:12:37 – 00:14:57)

Resources:

Episode 189 | LLC vs. S Corp: Which Is Right for Your Business?

KSA Tax Partners | Reasonable Compensation Analysis

Free Gift | 'How Much to Pay Yourself as a Business Owner' Calculator

KSA Tax Partners | https://ksataxpartners.com/

Preferred Payroll Provider | Gusto

*This content is not sponsored by Gusto

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