According to this Accounting Today article, “Business owners are still getting away with avoiding billions of dollars in taxes.”
The Treasury Inspector General for Tax Administration found the IRS is selecting less than 1% of all S corporations for examination for compliance with payment of employment taxes. When the IRS does examine an S Corp, nearly half of IRS revenue agents don’t evaluate compensation during the examination, even when there’s a sole proprietor who didn’t report the officer’s compensation and may have taken tax-free distributions in lieu of compensation.