BerkshireCPA wrote:My question to those using RC Reports is are you utilizing this service to get the lowest possible acceptable salary or are you using it because you want to minimize risk to yourself?
Both. Outsourcing of risk, and because at this point I generally believe RC Reports is going to come in materially below a client's estimate if they just pulled offer data from Indeed.com. Most owners where many hats and spend a great deal of time doing low value work, but don't realize it.
Almost everyone I hear from involved with reasonable comp has conveyed this is now a strong IRS target. I believe they have the tools to find and flag associated 1120-S returns for reasonable comp audit. One thing is certain... Whatever your number is, it better be substantiated with thoughtful, reasonable and tactful documentation. RCReports is very professional and well reasoned documentation for the file.
BerkshireCPA wrote:If I have a client that has a $5 million bottom line and I have them at a $500k salary? Is he going to be ticked at me because an RC Report might show his reasonable comp is $280k? I am costing him $2k plus in medicare each year.
I don't think there's anything wrong with giving the client options. Either they can engage me to utilize RC Reports, or they can be responsible for determining reasonable comp and documenting their method for determining that reasonable comp. Just inform them in writing of the obligations and the risks.
I also don't think this there's anything wrong with opining on whether their figure looks high, low or about right from a 10,000 ft view and opining on the cost-benefit of an RC engagement.