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IRS S Corp Stats

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By Jason Watson, CPA

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.next article


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