TheTaxGuy

For physicians operating as S-Corporation owners in the Triad region of North Carolina—Greensboro, Winston-Salem, and High Point—the question of how much to pay yourself in W-2 salary versus distributions isn’t just financial—it’s strategic. Getting this balance right can mean the difference between thousands saved in taxes and a costly IRS audit. But the right number isn’t one-size-fits-all, especially when you compare the Triad to other growing metro areas like Charlotte or Raleigh.

What Is Reasonable Compensation?

If you are a physician running your own S-Corp practice, the IRS requires you to pay yourself a “reasonable salary” before taking any profit distributions. This salary must be reported as W-2 income, subject to Social Security and Medicare taxes. Distributions, by contrast, are not subject to self-employment tax, making them far more tax-efficient—but only if your salary passes the smell test.

A reasonable salary is based on the fair market value of the services you provide to your business. For physicians, that number will vary depending on specialization, location, and the percentage of time actually spent providing clinical services vs administrative or managerial duties.

Greensboro, Charlotte, Raleigh: Not All Markets Are Equal

While all three are part of North Carolina’s economic engine, the IRS views physician compensation in Charlotte differently than in Greensboro or Raleigh due to local market rates.

• Charlotte: Physicians here—especially specialists—may be expected to earn higher base compensation due to the city’s size, patient demand, and proximity to major health systems like Atrium and Novant. A general practitioner might justify a W-2 salary closer to $180,000–$220,000.
• Raleigh: Raleigh’s mix of government, tech, and research institutions (like Duke and UNC) create a competitive market. A W-2 salary in the $160,000–$200,000 range is often considered reasonable for independent physicians.
• Greensboro (Triad region): In the Triad, typical salaries may trend slightly lower depending on specialty and insurance mix. A reasonable W-2 salary might fall between $130,000 and $170,000 for a family medicine or internal medicine physician, provided it’s supported by regional data or industry compensation reports.

The Real Strategy: Salary + Distributions = Coordination

Salary and distributions are two sides of the same coin. But without coordinating the full financial strategy, physicians often miss opportunities. Here’s why:

• Too high a salary? You’ll overpay payroll taxes and reduce the cash you could be taking home via distributions.
• Too low a salary? You raise a red flag with the IRS, especially in audits or if you’re contributing heavily to retirement plans.
• Improper structure? If you’re taking distributions without aligning them with retirement planning, insurance, and expense tracking—you’re not in control of your tax output.

This is why physician tax planning is not just about the W-2 figure. It’s about the entire structure.

Control the Output: Strategic Tax Planning Wins

At J Scott & Associates, we are a specialized tax firm helping high-income professionals—especially S-Corp owners like physicians—take control of their tax liability through proactive strategy. If your financial plan only includes payroll and filing taxes each April, you’re playing checkers when you could be playing chess.

We help our physician clients build a complete tax-efficient structure:

• W-2 salary backed by compensation benchmarking reports
• Distributions timed to minimize tax exposure
• Retirement plan integration (Solo 401(k), defined benefit, etc.)
• Accountable plans and medical reimbursement structures
• S-Corp optimization for family members and legacy planning
• Quarterly strategic check-ins

Every dollar you earn deserves a plan. And every tax season is an opportunity to position yourself more powerfully for the next one.

Final Thought

If you’re a physician in the Triad, don’t rely on what a colleague in Charlotte is doing. Local context matters, but strategy matters more. Reasonable compensation is the IRS’s concern—but intentional financial architecture should be yours.

If you’re ready to take control of your tax output and align your salary and distributions with a full tax strategy, let’s talk. At J Scott & Associates, we don’t just file—we strategize.