{"id":35133,"date":"2024-09-09T08:19:37","date_gmt":"2024-09-09T15:19:37","guid":{"rendered":"https:\/\/evergreensmallbusiness.com\/?p=35133"},"modified":"2024-09-09T08:46:14","modified_gmt":"2024-09-09T15:46:14","slug":"using-chatgpt-to-determine-s-corporation-reasonable-compensation","status":"publish","type":"post","link":"https:\/\/evergreensmallbusiness.com\/using-chatgpt-to-determine-s-corporation-reasonable-compensation\/","title":{"rendered":"Using ChatGPT to Determine S Corporation Reasonable Compensation"},"content":{"rendered":"

\"You<\/a>A disclosure to start this discussion about using ChatGPT for determining S corporation reasonable compensation. I do not<\/em> think the large language models like ChatGPT do a great job with tax accounting or tax law.<\/p>\n

They\u00a0 don\u2019t. Or at least not yet. And maybe never.<\/p>\n

But if you\u2019re an S corporation owner? And you\u2019re struggling to set a shareholder-employee salary? Because ChatGPT does its work for free, and because it\u2019ll often do an adequate<\/em> job, I think you and I can use it. Its calculations and conclusions should often result in a reasonable compensation number.<\/p>\n

But let me step you through the process I\u2019d suggest.<\/p>\n

The Trick is Your Prompt<\/h2>\n

You may already know this. But you ask an AI (artificial intelligence) model like ChatGPT questions.<\/p>\n

You can for example ask a question like, \u201cWhat is the average salary of a carpenter?\u201d Or, \u201chow much does a preschool teacher earn?\u201d<\/p>\n

These questions then prompt the AI. And then it returns your answer.<\/p>\n

The trick to getting a usable S corporation reasonable compensation number? Providing a good prompt.<\/p>\n

For example, a carpenter working as a small contractor in (say) Mount Vernon, Washington might ask, or prompt, the AI with a question like this:<\/p>\n

I work as a carpenter and project manager for a small construction company in Mount Vernon, Washington. I have several years of experience. The firm\u2019s total revenues fall between $500,000 and $1,000,000 a year usually. We do small home remodeling jobs. What would be the range of reasonable salaries for this position as well as common fringe benefits? Please cite your sources.<\/p><\/blockquote>\n

You want, as the above prompt does, to provide as much detail as you can. Also, ask the AI to provide citations for its sources.<\/p>\n

When I asked ChatGPT this question in August of 2024, by the way, it provided the following answer\u2014which seems good enough:<\/p>\n

In your role as a carpenter and project manager for a small construction company in Mount Vernon, Washington, several factors influence salary expectations, including the size of the company, your level of experience, and regional economic conditions.<\/p>\n

Salary Range<\/strong><\/h3>\n

For a position combining carpentry and project management at a small firm, here\u2019s a reasonable salary range:<\/p>\n