Paying yourself wages as an employee of the S corporation results in Federal income tax, Medicare and Social Security being withheld from your pay and remitted at least quarterly to the Treasury. It also means the employer S corporation pays matching amounts of Medicare and Social Security as a business expense to the Treasury. It also may mean other applicable taxes such as unemployment benefit taxes, SUI, FUI and who knows how many other Federal and state taxes there are on employee wages.
On the other hand, a distribution of income of the S corporation to a shareholder is a tax-free payment. Since the shareholder picks up his/her share of the income of the corporation whether it is distributed or not, a distribution itself is not a taxable event. And no payroll taxes are withheld. And the distribution is not subject to the Self-Employment Tax.
Now, don't get the idea that you can forego any wages in favor of all distributions. The IRS figured that out also and volumes of material have been written on how they might re-characterize a distribution as wages to collect the payroll taxes. Your best bet is to make a stab and the division yourself so you show that you recognize that a wage payment to a controlling shareholder is part of the game. As long as you're reasonable in the split (and don't get me started on what reasonable means) the IRS will most likely leave you alone. But if you say everything is a distribution and there are no wages, be prepared to fight a losing battle if and when they come knocking.
Incidentally, after year end, you cannot go back and re-characterize a distribution as wages since you did not report those wages on a quarterly payroll return nor did you give yourself a W-2. So you may be "up the creek" for 2015 but forewarned for 2016.
