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IRS S Corp Stats

Article ID: 341
Last updated: 24 Nov, 2018
Revision: 10
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By Jason Watson ()
Posted November 23, 2018

Let’s jump right into some numbers first before going through reasonable S Corp salary theory developed from IRS revenue rules and Tax Court cases. The following table is a summary generated from IRS statistics on S corporation tax returns for the 2013 tax year. Yes, this is the most current. No, we do not know why a room full of servers can’t crunch this in real-time. So here we are-

Annual Receipts

Gross Receipts
Per Return

Net Income
Per Return

Officer Comp
Per Return

Officer Comp %
of Net Income

$25,000 to $99,999

62,552

6,672

8,871

57%

$100,000 to $249,999

168,051

22,194

22,786

51%

$250,000 to $499,999

365,476

37,732

43,158

53%

$500,000 to $999,999

720,013

58,351

67,474

54%

$1M to $2.5M

1,572,621

119,808

110,911

48%

First some quick observations. Officer compensation is added back to net income to determine officer comp as a percentage of net income. Next, this is all industries from capital intensive manufacturing to personal services business such as attorneys, doctors, consultants, engineers and accountants.

Also, this includes S Corps who lost money, and whether they lost money and continued to pay a reasonable shareholder salary (Officer Compensation) is unclear. In other words, if losses were teased out would Officer Compensation be reduced as a percentage of net income? We cannot quickly determine.

Here is the same data grouped by gross receipts but detailed by selected industries. First one is $100,000 to $249,999 in gross receipts-

$100,000 to $249,999

Gross Receipts
Per Return

Net Income
Per Return

Officer Comp
Per Return

Officer Comp %
of Net Income

Finance and Insurance

160,359

34,408

23,213

40%

Real Estate

165,375

38,231

28,193

42%

Professional, Scientific

163,151

32,910

35,404

52%

Health Care

174,383

24,622

36,026

59%

And now for $250,000 to $499,999 in gross receipts-

$250,000 to $499,999

Gross Receipts
Per Return

Net Income
Per Return

Officer Comp
Per Return

Officer Comp %
of Net Income

Finance and Insurance

366,533

77,518

62,329

45%

Real Estate

359,163

65,419

51,151

44%

Professional, Scientific

355,693

71,136

74,493

51%

Health Care

378,147

51,553

75,382

59%

There you go. Remember that Officer Compensation includes all fringe benefits such as self-employed health insurance and HSA contributions, and it might be influenced (increased) by those who want to maximize 401k deferrals and / or defined benefits pensions. In other words, people with more discretionary cash wanting to defer taxes might increase salaries to do so.

Taxpayer's Comprehensive Guide to LLCs and S Corps : 2019 Edition
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Chap 9 - Reasonable Shareholder Salary       Reasonable S Corp Salary Theory