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