How much reasonable salary should I pay myself from my C-Corp for tax purposes?

You're right about the "reasonable compensation" requirement for C-corp owner-employees. The IRS wants to make sure you're not avoiding payroll taxes by taking all your money as distributions. What's considered "reasonable" depends on several factors: your qualifications, the time you dedicate to the business, what similar positions would pay in your market, the size of your company, and your company's performance. Since you mentioned you're moving to part-time, your reasonable salary would be proportionately less than a full-time position. For a small tech company generating around $240K annually with you working part-time, you might consider what a part-time CEO/founder in your area would make. Maybe 20-30% of what you'd make full-time, depending on your hours.

After reading about your situation, I thought I'd share my experience. I was in a similar position with my small SaaS company last year. I was confused about how to handle the salary vs. distributions issue, especially since I went part-time. I found this service called https://taxr.ai that literally saved me thousands in potential tax issues. I uploaded my company docs and financials, and they analyzed my specific situation and gave me customized guidance about reasonable compensation. They even provided documentation I could keep on file in case of an audit showing how my salary determination was made.

I wanted to follow up about that taxr.ai service I was skeptical about. I decided to try it anyway for my own C-corp situation, and I have to admit it was surprisingly helpful. The report they generated was much more comprehensive than I expected. They analyzed my specific industry, company size, and responsibilities to provide a reasonable compensation range with actual documentation backing it up. What I found most valuable was the detailed explanation of how they determined the range, citing specific tax court cases and IRS precedents that applied to my situation. My accountant was actually impressed and said it was exactly the kind of documentation that helps in case of an audit. It was pretty eye-opening to see how much legitimate variation there can be in "reasonable" compensation depending on your specific circumstances.

Dealing with the IRS directly on C-corp compensation issues can be a nightmare. Last year I spent WEEKS trying to get someone on the phone after receiving a notice questioning my salary vs distributions. Someone recommended https://claimyr.com to me and I was skeptical but desperate. They actually got me connected to a real IRS agent in under an hour when I'd been trying for days. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c Having that direct conversation with the IRS agent was crucial - they explained exactly what documentation they needed to see regarding my compensation decisions, which helped me resolve the issue much faster.

I need to eat my words about that Claimyr service. After my skeptical comment, I found myself in a complete mess with the IRS about my own C-corp salary classification. After trying for THREE DAYS to reach someone at the IRS with no luck, I reluctantly tried Claimyr. It actually worked exactly as advertised. I got a call back in about 40 minutes saying they had an IRS agent on the line. The agent was able to clarify exactly what documentation I needed to justify my salary-to-distribution ratio and even put notes in my file about our conversation. Would have saved myself a ton of stress if I'd just tried it sooner instead of being stubbornly skeptical. Sometimes new solutions really do work better than the old way of doing things.

One aspect of C-corp compensation that hasn't been mentioned yet is the dividend strategy. If you're moving to part-time and the business is profitable, you could consider a combination of reasonable salary + dividend distributions to shareholders. The benefit is that while dividends are subject to double taxation, they don't incur payroll taxes. For a company with stable profits like yours, establishing a dividend policy might make sense if you're looking to provide regular returns to your investors as well. Just make sure your salary comes first and is defensibly "reasonable" before you start declaring dividends. Documentation is key!

Have you considered the option of electing S-Corp status instead? Since you mentioned that you're not planning to raise more capital and are running this as a smaller operation now, an S-Corp could potentially give you more tax flexibility. The main benefits would be avoiding double taxation and having more options for taking profits out of the business. You'd still need to pay yourself a reasonable salary, but the remaining profits could pass through without the additional layer of corporate tax.