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Twice a month, get clear, smart tips to help you keep more money, build wealth, and make taxes easier for 1099 CRNAs.
INTRO
Welcome to Money Moves for CRNAs—the podcast created specifically for 1099 CRNAs who want clarity, confidence, and control over their money.
This podcast is for educational purposes only and is not personalized tax or financial advice.
Here’s your host, Randy Larkin, with Atlanta Tax Planner.
HOST
Hi there, this is Randy Larkin.
If you're a 1099 CRNA with an S corporation, you can have your accounting organized, your payroll running, and your tax returns filed—and still have one important number wrong: the salary you pay yourself.
That number is called reasonable compensation.
And if the IRS believes your salary is too low, some of the distributions you took from your S corporation could potentially be treated as wages instead.
So today, let's talk about what reasonable compensation means, why it matters, and why it shouldn't simply be a number you pick and forget about.
WHAT IS REASONABLE COMPENSATION?
When you own an S corporation and also work in the business, you generally receive money in two ways. You receive wages through payroll. And you may receive distributions from the profits of the company.
Those two types of income are treated differently for payroll-tax purposes. That's why the IRS cares about the salary you pay yourself.
The basic idea is simple: If you're working for your S corporation, the corporation needs to compensate you reasonably for the work you're performing.
For a 1099 CRNA, that can be especially important because your business may generate several hundred thousand dollars a year.
WHY DOES THE IRS CARE?
Wages are generally subject to Social Security and Medicare taxes. S corporation distributions generally are not.
So imagine an S corporation earning substantial income while the owner takes a very small salary and most of the money as distributions. That creates an obvious question: Was the owner really being paid reasonably for the work performed?
If the IRS decides the answer is no, it may reclassify some distributions as wages. That can mean additional payroll taxes, penalties, and interest.
So reasonable compensation isn't just an accounting detail. It's part of operating an S corporation properly.
THERE ISN'T JUST ONE CRNA SALARY
This is where reasonable compensation is often misunderstood. There isn't one salary that automatically works for every CRNA.
Your situation matters. The work you're performing matters. How much you're working can matter. Your responsibilities can matter. And your business can change from year to year.
That's why asking another CRNA, "What salary are you paying yourself?" doesn't really answer the question. Their facts aren't necessarily your facts.
DON'T START WITH "HOW LOW CAN I GO?"
Another common mistake is asking: "What's the lowest salary I can pay myself?"
That's really the wrong question. The goal isn't to find the lowest possible number. The goal is to have a salary that is reasonable and supportable for your particular situation.
Yes, an S corporation can provide tax advantages. But those advantages only work when the S corporation is operated properly. Reasonable compensation is part of that.
IT CAN AFFECT MORE THAN PAYROLL TAXES
Your salary can also connect to other areas of your financial planning. For example, compensation can affect certain retirement-plan contributions and employee benefits.
So lowering salary isn't automatically better. One tax decision can affect another planning opportunity. That's why reasonable compensation should be considered as part of your overall tax system—not in isolation.
YOUR SALARY SHOULDN'T BE SET AND FORGOTTEN
Reasonable compensation also isn't necessarily something you determine once and use forever.
Your business can change. Your contracts can change. Your income can change. You may work more or fewer hours. You may start working in another state.
So your compensation should be reviewed periodically. A number that made sense several years ago may not necessarily make sense today.
THE BIG TAKEAWAY
If you're a 1099 CRNA operating through an S corporation, you don't need to become an expert on reasonable compensation. But you should understand this:
Your salary shouldn't be arbitrary.
It shouldn't simply be copied from another CRNA. And it shouldn't be based only on how much payroll tax you want to save.
Your compensation should fit the facts of your situation and be something that can be supported if it's ever questioned.
That's really what reasonable compensation is about: not finding the lowest possible salary, but finding a reasonable and defensible salary for you and your business.
HOST OUTRO
And if you're thinking, "I have an S corporation, but I'm not sure what else in my tax setup I should be paying attention to," that's exactly why we created the 1099 CRNA Tax System Review.
It's not designed to turn you into a tax expert.
It's designed to help you recognize the areas of your tax system that may need a closer look—and the questions you should be asking before a problem shows up on your tax return.
You can download the free 1099 CRNA Tax System Review through the link in the description.
ANNOUNCER OUTRO
Thanks for listening to Money Moves for CRNAs.
New episodes drop twice a month.
See you soon.