"But, the amount over that, that flows to my 1040 IS actually earned by me because there is no one else." It's earned by the corporation which is a separate tax entity from yourself. An S-corp passes through such income to you for inclusion on your individual tax return, but it is not compensation. Your compensation from the S-corp is only what is paid to you and reported on your W-2 for which the S-corp takes a deduction and pays FICA taxes.
