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The S-Corp Salary Question Every Endodontist Gets Wrong in Both Directions

Set your owner salary too high and you overpay payroll tax. Set it too low and you invite scrutiny. There is a defensible range, and it moves as you grow.

If your practice is an S-corp, you pay yourself two ways: a W-2 salary and distributions. Only the salary is subject to payroll tax. That single fact is where a lot of money is won or lost.

Set the salary too high and you hand the government payroll tax on income that could have flowed as a distribution. Set it too low and you look like you are dodging payroll tax, which is one of the most reliable ways to draw an audit.

The standard is reasonable compensation: what you would have to pay someone else to do your job. For an endodontist, that is anchored to specialist clinical wages in your market, not a round number someone picked years ago and never revisited.

The trap is that the right number moves. As production grows, a salary that was defensible at $300,000 in profit can become either too low a share or an outdated figure. Most owners set it once and forget it.

Getting it right is not about being aggressive. It is about landing in the defensible range and documenting why, so the split holds up and you are not leaving payroll tax on the table or inviting a second look.

Key takeaways
  • Only the W-2 salary portion of S-corp pay is subject to payroll tax, so the salary/distribution split is where money is won or lost.
  • The standard is reasonable compensation: what it would cost to hire someone for your clinical role in your market.
  • The right number moves as production grows, so it needs revisiting, not setting once.
How is a reasonable S-corp salary determined?
By what it would cost to hire someone to do your clinical role in your market, documented and revisited as production grows.
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