Adam Sand shows S-corporation owners how to cut payroll taxes and pull money tax-free through four strategies: reasonable compensation adjustments, accountable plans for reimbursements, board documentation for business travel, and the Augusta Rule for home-based meetings. A Texas roofer turned a hunting trip into a deductible board retreat, saving roughly $3,000 to $5,000 per strategy.
Most business owners are overpaying the IRS by thousands every year just because they're skipping the basics. Corporate compliance isn't just paperwork, it's the gateway to smarter tax strategies. I have S corporation owners that pay themselves way too much, like 2 to 3 times what they should be paying themselves, because they're like, I don't know how to take money out of the corporation, so I just pay myself W-2 and taxes are taken out of that, and cool, I'm good. Well, they're overpaying massively on payroll taxes. Most business owners are overpaying themselves to the tune of probably $50,000 to $60,000 that LLC, and as a result, that is like $3,000 to $5,000 that they're wasting on payroll taxes. Corporate compliance can save you $3,000 to $5,000 from the reasonable compensation aspect. The other thing that when you establish corporate compliance, now you do a corporate resolution, say we're going to adopt an accountable plan. What is an accountable plan? Basically, that is a plan that you adopt for your company and say, hey, this is our reimbursement policy. So if you are reimbursing employees, which as an owner of the corporation, I am an employee of my own corporation, right? There are things that you can reimburse, and reimbursements are tax-free. So it's a tax-free way to pull money out of your business. On average, we see accountable plans when we establish them for companies generate about $3,000 on average in tax savings. You'll save $3,000 conservatively with reasonable comp, $3,000 for accountable plan. Nice. Board of directors, when you establish corporate compliance, now you do a corporate resolution and say, hey, we're going to establish a board of directors. Now, board of directors are not officers of the corporation. Board of directors are a board of advisors or board of directors. Those are folks that are not listed on the legal documents with your Secretary of State, but they do attend at minimum, I would say, 1, probably 2 meetings a year. I had a roofing contractor in Texas and we were talking through this, his hunting trip. He had gone hog hunting. I'm like, Josh, you know, tell me about who are your key people? He's like, well, my operations manager, foreman type guy, he came. My brother's my business partner. He came. These are the key people. I'm like, cool, what have you done recently with them? Oh, we went hog hunting. Okay, sweet. How long did you go hog hunting for? That was a good 5-day, 6-day trip with travel and like 1 day there and then 3 or 4 days hog hunting and then 1 day back. And I was like, okay, what was the cost of that? And he's like, oh man, don't tell my wife, it was way too much. And I was like, okay, so what'd you talk about? Did you talk business while you're driving across the country? When you're sitting around the campfire, were you talking shop? Oh yeah, absolutely. Okay, cool. If you put those people on your board of directors, the requirement for a workday is only 4 hours. Did you do at least 4 hours worth of talking and kind of masterminding while you were out and looking up at the stars and enjoying God's creations? He's like, yeah, at least 4 hours a day. I was like, okay, could you summarize that in a document and put it together? Oh yeah, absolutely. So we turned his hog hunting trip, which cost him about $5,000— he was covering the cost of, you know, ammo and equipment and food and all that— we turned his hog hunting trip into a tax-deductible time-off vacation. That's the power of a board of directors. And then the last thing is Augusta rule. You can do a corporate resolution for established events that we're going to host. We're going to reimburse the owners for use of their home for events, board of directors meetings. You can have client appreciation meetings. You can have employee appreciation meetings, vendor appreciation, like barbecue, these types of things. These are some of the strategies that you can leverage through a corporate resolution. So a corporate resolution is a document that goes into your corporate binder or your corporate records. And what that means is a corporate resolution is you meet as a board or as owner, as officers of the corporation and say, hey, we're going to make a decision. And that decision is to do X, Y, and Z. A corporate resolution is simply an internal legal document that goes into your binder. If you get audited and your corporation auditor is likely going to say, hey, show us your corporate documents. Show us that you're corporate compliant. And if you send them a document that has like a piece of paper in it that you never signed, that doesn't look good. They're like, okay, you're playing small. You're not acting like the big boys and girls that are corporations. But if you send them a document or documents that have signatures on them and they have, you know, corporate resolutions 3 to 4 a year where you're like, hey, we're going to make business decisions, you know, that adds legitimacy to your corporation, which adds legitimacy to your tax savings that you could capture by being a corporation.
