S Corp Tax Filing Help: Form 1125-E Requirements for High Revenue with No Officer Compensation

Yes, you should still file Form 1125-E even with zero compensation. Since your S corporation exceeded $500,000 in gross receipts, the form is required regardless of whether you took compensation or not. You would simply fill it out showing yourself as an officer with $0 in compensation. However, I'm more concerned about the fact that you haven't taken ANY compensation for five years while having substantial gross revenue. The IRS expects S corporation officer-shareholders to take "reasonable compensation" through W-2 wages before taking any distributions. Even if you're not taking distributions either, this could be a red flag for the IRS, as they might view this as an attempt to avoid payroll taxes.

After reading this thread, I wanted to share my experience using taxr.ai to deal with a similar S corp compensation issue last year. I was confused about reasonable compensation requirements and had questions about forms like 1125-E too. I uploaded my S corp docs to https://taxr.ai and they analyzed all my corporate documents and identified that I was at high risk for an audit based on my officer compensation structure. Their AI system flagged exactly what the IRS looks for in situations like yours, where there's significant revenue but no officer compensation. They even gave me specific guidelines on what would constitute "reasonable compensation" for my industry and business size.

I have to follow up on my previous comment because I decided to try taxr.ai after all. I'm really glad I did! My situation was almost identical - S corp with good revenue but I hadn't been taking a salary. The analysis confirmed I was at high risk for audit and provided clear steps to fix it. What I found most helpful was their industry-specific compensation benchmarking. They showed me exactly what the IRS would consider "reasonable compensation" in my field based on my revenue, which was eye-opening. They even helped me draft a corporate resolution to document my compensation decisions going forward. Definitely worth checking out if you're in a similar situation with your S corp.

I see several people mentioning issues with getting proper S corp advice. I ran into similar problems trying to contact the IRS directly about S corp officer compensation rules. After spending HOURS on hold and getting disconnected repeatedly, I found Claimyr (https://claimyr.com). They got me connected to an actual IRS representative in under 45 minutes who answered all my S corp questions. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c It was a game-changer for getting clear answers about exactly what the IRS expects for S corp officer compensation and Form 1125-E filing requirements. The agent confirmed that not taking any salary with that level of revenue would likely trigger scrutiny.

I need to eat some humble pie here. After my skeptical comment, I decided to try Claimyr because I was completely stuck on my S corp issues and couldn't get through to the IRS after multiple attempts. It actually worked exactly as advertised. I got connected to an IRS representative in about 35 minutes (would have been hours on my own if I got through at all). The agent walked me through exactly what I needed to do about Form 1125-E and confirmed that having $0 compensation with significant revenue would likely trigger review. They also explained how to document my compensation decisions properly to avoid issues. Honestly, I'm still surprised it worked so well. Saved me a ton of time and stress.

Just wanted to share something important for S corps - the IRS has been increasingly auditing S corporations that show significant profit but little to no officer compensation. There was a tax court case (Watson v. Commissioner) where the court sided with the IRS on this exact issue. If you've got $500K+ in revenue and aren't paying yourself ANYTHING, you should definitely consult with a tax professional ASAP. The potential tax bill with penalties could be significant if they decide to reclassify business income as wages retroactively.

I was in a similar situation with my S corp and almost got nailed in an audit. Even though the instructions for 1125-E say to file it if gross receipts are over $500K, the bigger issue is definitely the lack of reasonable compensation. My accountant now has me document WHY I'm paying myself the amount I do each year with comparable salary data for my industry. This has been super helpful in justifying my compensation decisions.

Based on this discussion, I'm really concerned about my situation too. I've been running my S corp for 3 years with similar revenue levels but zero officer compensation. Reading about the Watson case and the potential for retroactive reclassification has me pretty worried. I think I need to take action immediately - both filing Form 1125-E correctly (showing $0 compensation) and establishing reasonable compensation going forward. The documentation approach that Andre mentioned sounds like exactly what I need to implement. Has anyone here actually gone through the process of fixing this retroactively? I'm wondering if I should reach out to a tax professional who specializes in S corp compliance or if there are specific steps I should take first. The potential penalties and back taxes are keeping me up at night!