"I have an S-corp and don't pay myself a salary to save on taxes"

This is the first thing the IRS checks when it sees an S-corp. And it's where owners lose more than they save.

The logic that seems to work

Salary is subject to payroll taxes (15.3% including the employer share), profit distributions are not. So the lower the salary, the lower the tax. On paper it works.

Why it doesn't work in practice

The IRS requires reasonable compensation: a salary in line with what you would pay someone else to do the same job. If an owner works actively in the company and takes $0 or a token salary while the company makes a real profit, that isn't a gray area. It's a clear violation.

What it leads to

In an examination, all distributions can be reclassified as wages, with back payroll taxes, interest and a failure-to-pay penalty.

How a reasonable amount is set

The benchmark is what a professional with your duties, hours and experience would cost on the job market. Not a percentage of profit, and not a minimum amount just to check a box.

The right S-corp logic isn't "zero salary" but "reasonable salary plus distributions on top". The savings are still there, just not where people look for them.