Every S-corp conversation in Texas eventually lands on the same question: how much should the owner take in wages versus distributions? There is no IRS table. There is also no safe harbor in a Facebook group.
Reasonable compensation is a facts-and-circumstances test. What would you pay someone else to do the work the owner actually does? Revenue, duties, time, geography, and comparable wages all matter. A professional-services shop in Dallas is not a holding company that owns a single rental.
What we will not do is pick a round number that “looks fine.” We write a short memo: duties, hours, comparables, and the wage we will run through payroll. Then we run payroll. Distributions after that are distributions — not a substitute for wages.
Two failure modes show up every spring. One: draws only, no payroll, a large K-1, and a return that invites a question. Two: a token wage that does not match the work, with the rest labeled a distribution. Both are avoidable.
If you already have an S-election, the fix is not complicated. We set the wage, catch up payroll if needed, and file a return that matches the payroll forms. If you are considering the election, we model the self-employment tax savings against the payroll cost before you Form 2553.