All right, Sharon, we're back to talking about reasonable compensation today for S corporations. This is just something that, you know, there's a lot of scrutiny around this right now. And you get a lot of differing opinions on this as well. But we know that the IRS is looking at this, they've made this, you know, one of the hot topics. And we want to make sure that people understand that, that they're asking the right questions of their advisors. So that's what today's session is going to be on. Again, I'm not going to dive real deep in it, we're going to stay high level, so you'll stay awake. But but we do want to let everybody know about that. So reasonable compensation refers to the amount of salary that as an S corporation owner, that you receive for the services you provide to the business. Okay, I mean, that's kind of it in a nutshell. So remember, as we've talked about, you know, through our S corporation series here, one of the things that you have to do if you have an S corporation, is you have to run a salary, you have to run a payroll for that. And as part of that payroll, that's where you pay your self employment taxes, your FICA taxes. Remember, we've talked about this as well. And that there's an incentive here to lower the amount that you pay yourself as salary to save on those FICA taxes. Well, as we've talked about, the IRS understands this. And that's where they set up this reasonable compensation. But Sharon, they don't tell us what reasonable is. Reasonable to you might be one thing and reasonable to me and the IRS might be something else. So you've got to substantiate the reason you set up your salary the way you have. So that's the basic definition of reasonable compensation. Some of the things when you're setting up that reasonable compensation, that salary, it should be, you know, what are you doing for this salary? What responsibility? How much time are you putting into it? What's the expertise that you have? So Sharon, your expertise is what? Giving anesthesia. Giving anesthesia, airway management. We know that people that give anesthesia get paid a certain dollar amount each year, right? You know, it also reflects the amount of time that you're spending doing what you're doing. So you know, as a business owner, there's things that you're going to have to do that not only involve anesthesia, you know, you've got to wear a lot of different hats and different hats pay different amounts. So you've got to have that reason set up for what you paid yourself. You know, what are your skills, your education, your experience, you know, what certifications, all these things. So Sharon, you know, you're going to sit down and go through your books, your QuickBooks, right? Now, let me ask you a question. Do people that do that for a living, do they make $200 an hour? No, but I'm going to push back just a little bit on skills, education, and experience because these kids coming out today make as much as somebody who's got experience, right? Well, it is, but you know, their salary is no different than yours, really. I know that's probably what the IRS gives it as a qualifier, but I'm saying that in our profession, those things really don't make that big of a difference. I think that industry standard is what makes the most difference in this conversation for us. It does. And you've got to look at those industry standards, but you also got to look at how much someone's working. We know that the average, just to give you a general idea, the average CRNA is making, you know, $187,000 according to the ANA Compensation Benefits Study. And that's working full time, 40 hours a week, 52 weeks a year, 2,080 hours. And now you come along and you're working 20 hours a week. Then if the average CRNA is making $187,000, then your salary because you're working half time should be $93,500. That's substantial. You can substantiate that. That makes sense. It's factual. So, a lot of it is how many hours are you working and what are they paying you to do that? You know, if you're doing eyeballs and buttholes, as I so hear you talk about, that might not pay as much as someone who's, you know, doing hearts, for example, when they're in a hospital, you know, that is a higher level of care. So, you've got to take all those things into account when you're doing this. And the other thing is when you're 1099, that's what I was alluding to a minute ago, you've got to wear their hats. How much time are you spending running that business? Going to meet with your accountant, doing your QuickBooks, running your payroll, looking at, you know, the profitability of the company, looking at your P&L every quarter to see, oh, I spent this and I did that, trying to find additional work opportunities, networking with other CRNAs to find additional work opportunities. All these things are part of what you've got to do as a business owner. And you've got to be able to quantify how much time you spent doing that. Is it 10 hours a week? Well, if it's 10 hours a week, you know, what does it take for somebody to do that? Is it $20 an hour now? Is it 25? It's a whole lot less than 200. So, you've got to be able to quantify that and then come up with this reasonable compensation for what you do. And will it hold up? Who knows? The IRS says reasonable. They don't give us, you know, there are some parameters, but you've got to be able to quantify and detail why you did what you did. If you just said, hey, I'm just going to pay myself $100,000. I made 500 and I worked 70 hours a week. And you're sitting in front of the IRS and they go, why'd you do that? Benny Sue over here told me she paid herself $100,000 and her CPA said that was okay. I don't know that's going to float the boat. So, that's why this conversation is so important. Underpaying your compensation, you know, that is something that we always worry about because the IRS, again, is looking at this. Sharon, I don't know if you know about Social Security, but it's going very quickly. They're looking for ways to get more revenue into the system. I don't know if you know about Medicare, but your reimbursement rates keep going down because that pot's shrinking too. So, they're looking for more ways to get money in there. One of the ways they get money in there is through the payroll tax. So, therefore, we got two things that are broke. And if you're not paying yourself the correct amount, you're underpaying your taxes. You wonder why they're looking at that, right? So, take that into account as well. Shareholder distributions. Remember, that's one of the sizzles behind the Escort. How much did you take in distributions versus how much you took in salary? Again, they're looking at that. Remember in our section, you know, we talked about the K-1s. They're tracking what those distributions are through K-1. So, you've got to be able to pay attention to these things and understand how it all fits together. And that's really the idea here is not to make everybody out there and account it and But it's to think through it logically to say, all right, this step leads to this step, leads to this step. And if it's one thing I know about CRNAs, you guys are very logical creatures. What are the consequences if you don't do this? You know, there's the potential for IRS scrutiny. They could go back and classify your distributions and say, you know what? Those distributions aren't distributions. They should have been salary. Now you owe us that 15.3% plus penalties, plus interest, and so forth. Do you want to have that as an issue? Do you want to have that hanging over your head? For most people, I'd say probably not. But setting a reasonable compensation, understanding how and why you're doing what you're doing, managing your distributions effectively, and really in the long run, you're minimizing what the tax is by just having the escort there. Make sure that you understand how it all kind of works together. This is just a big piece that we're seeing more and more scrutiny on. And rightly so, given the fact that Medicare and Social Security are having issues funded. Now, Sharon, we can have that debate all day long about whether they're mismanaging the money and they stole money out of the Social Security trust fund and never paid it back. But anyway, it is what it is, right? Yeah, better go to the next slide. So best practices, document, document, document, document. And the reasoning behind why you set your salary the way it is. Don't take anybody's word for it. If you're working with someone and they say, oh, we just did this, why did we do that? If a surgeon came in, Sharon, and he told you to use Propofol, you know, and he told you that you needed to use that, but you knew you needed to use what? Give me one, come on. Well, the better scenario here is if they tell you how to manage an airway. And that happens all the time. You can tell that I'm not in the OR, right? But right, and that's the same thing here. You're going to ask why. Why am I doing it that way? And that's what I'm trying to get to here. Make sure that whatever compensation data you're using, you know, the ANA Compensation Benefit Study is a good one. Again, we've talked about this before. It kind of takes into account some of the nuances, but there's not a lot of people that do it. But at least it's something. You've got a reasoning behind doing what you're doing. And then make sure you're working with tax folks and advisors that understand the industry, the complexities of what you do, and are giving you the right reasonings for the things that they're having you do. I think all these things are best practices for making sure that you're setting your compensation reasonably and that you're not running afoul of the IRS.

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