The IRS, to the best of my knowledge, is not at all concerned with a salary on an absolute basis.
As a result, if the corporation is showing a net loss, the reasonable salary requirement becomes a non-issue. For example, if the figure in Box 1 of K-1 (1120-S) is -$100,000 and no salary had been paid, the IRS will not intervene because there is nothing to recharacterize (with these salary issues, the IRS handles the issue by recharacterizing some of the net profit passed through as ordinary income as salary that should have been paid).
On the other hand, if the corporation is profitable and is showing ordinary business income of $100,000, for example, in Box 1 of K-1 (1120-S) but no salary had been paid to shareholders who performed services, that is, indeed, problematic and the IRS may recharacterize part (or all) of the $100,000 as salary.
Obviously, the difference in either case is whether payroll taxes have been paid or should have been paid.
