The short answer is “no”, as long as the S Corp makes no distribution to the owner-employee to avoid payroll taxes. The reality is that the IRS cannot require a business to pay its employees a minimum salary.

Do corporate officers have to be paid?

When corporate officers perform a service for the corporation and receive or are entitled to payments, those payments are considered wages. The fact that an officer is also a shareholder does not change this requirement. Such payments to the corporate officer are treated as wages.

Why do S corporation officers take a salary?

If the business requires additional capital (for example, because it’s expanding) and the profits are plowed back into the business, you may be able to justify a smaller salary. Taking distributions suggests the business doesn’t need the cash, and it’s a way to compensate the officer/shareholder other than through salary.

Can A S corporation pay out zero wages?

In other words, if you have an S corporation that makes $100,000 in profit and the corporation pays out none of this profit as wages or as distributions to shareholders, you don’t need to worry about a zero wages situation. Here’s why: The IRS can’t force you process payroll.

Do you operate your business as an S corporation?

S Corporation Officer Must Take a Salary. Do you operate your business as an S corporation? If you work for the corporation, you generally must take a salary. An officer who performs more than minor services for a corporation, and who receives remuneration in any form, is considered an employee and is subject to employment taxes.

When do you pay an officer a wage?

When corporate officers perform services for the corporation, and receive or are entitled to receive payments, their compensation is generally considered wages. Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to shareholders.