Exempt Organization Annual Reporting Requirements: Meaning of "Reasonable" Compensation
How do we know whether the compensation we’re paying to our officers and key employees is reasonable?
Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances. Reasonableness is determined based on all the facts and circumstances. For more information on reasonable compensation, see Form 990 instructions, Appendix G, Section 4958 Excess Benefit Transactions, and Form 990-EZ instructions, Appendix E, Section 4958 Excess Benefit Transactions.