@Pleasehelpme9 wrote:
Well I think he was taking a reasonable salary then, he wasn't getting less pay when filing with the K-1.
"Salary" means income reported on a W-2. If he didn't have a W-2 he wasn't getting any salary at all. He might have been getting a reasonable amount of income, but not a reasonable salary. The distinction is technical and complicated. It has to do with how different types of income are taxed. That's why the IRS cares about the distinction. Taking income from an S corporation (on a K-1) without taking a reasonable salary on a W-2 is cheating. That's not cheating you. It's cheating the government.
