Why doesn't the IRS require form 1125-E to be filed for S-Corporations that make less than $500,000?

[SteveHolt298364]

Without the line-by-line accounting of each officers' wages on form 1125-E, how else (on form 1120s) does the S Corp delineate how much each officer was paid with respect to total officer wages on line 7?  Does the IRS compare each W-2 from different officers to the S-Corp's 1120s?

[Rick19744 · Accepted solution]

While no one really knows the algorithms used by the IRS in selecting returns for audits, an entity under $500,000 in total receipts does not appear to be a high priority on their radar.

Additionally, the W-2 is filed with the IRS and is then used to match with the respective individual receiving the W-2 to make sure the income is reported at the individual level.

This isn't saying the return can't be selected by the IRS to make sure reasonable wages are being paid to the S corporation shareholder's, just doesn't appear to be a priority as stated previously.