Reasonable Compensation S Corp Officers
As mentioned here, the IRS takes the view that s-corp officers should pay themselves a wages as an employee annually. Not only does the IRS take the view officers must pay themselves a wage/salary at least annually, but specifically they and certain court cases take the view that officers should pay themselves a reasonable compensation for services performed.
According to the IRS, the key to establishing reasonable compensation is looking at what the shareholder did for the S corporation. The IRS has this helpful page on the subject which provides these details:
We at ASAP Accounting & Payroll advise all officers to speak with their CPA's throughout the year to develop proper tax planning and to help establish a reasonable compensation for the officers as employees prior to issuing any distributions to the officers as shareholders. If you need a CPA, please let us know. To be clear, ASAP is not your CPA. Instead, ASAP is your day-to-day bookkeeping & payroll service professional. We prefer to work closely with your CPA to help translate and implement the tax plan they have created with you.
RCReports.com -- this subscription service has a tool designed to aid CPAs and their clients in review and building an audit-proof reasonable compensation strategy. To date, ASAP has not partnered nor licensed the product, but their blog posts & information is compelling and would be worth a look if you are concerned about the advice and direction you've been provided to date.