While IRS audits of large firms declined, as depicted above, "the IRS increased audit rates of small and mid size corporations (USA TODAY, IRS Cuts Back on Audits of Large Firms, 14 April 2008) Consider this fair warning - the IRS is looking very hard at S-Corps. The single largest item they target in S-Corps is the wages paid to officers and owners of the company. With the pass-through benefits afforded to S-Corp shareholders, some forgo taking a wage in lieu of distributions. The distributions avoid traditional payroll taxes, while wages do not. If you have an S-Corp and you have any net income in that entity, you should strongly consider paying yourself some wage to avoid the chances of popping up on the radar screen of the IRS. We recommend you work closely with your tax CPA or CFO advisor to implement a strategy for officer wages that is best for you.