Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Hello and Welcome! Please note: (1) this is general information only, not legal advice; and (2) provide you with honest information and not necessarily to tell you might be hoping to hear.
A zero salary is a "red flag" to the IRS because it has established rules and regulations requiring owners to take a reasonable compensation. The IRS does not want someone to avoid paying taxes. The IRS's basic argument is that no one works for free and therefore the IRS requires someone to pay themselves.
While a person may have a legitimate reason for not taking a salary such as to grow their business, it will likely raise a red flag and therefore put the tax payer in a position to defend his/her position and tax returns against the IRS which is can be expensive, stressful and time consuming.
I apologize that this was probably not the answer you were hoping to receive. However, it would be unfair to you and unprofessional of me were I to provide you with anything less than truthful and honest information. All my best & encouragement.Please note that you are asked to rate my courtesy and professionalism, and not whether the answer supports your legal position. I only receive credit when rated 3 or higher. If for any reason you feel that a low rating is appropriate, please first give me the opportunity to address your concerns by clicking the "reply" tab.Thank you for allowing me to be of service to you. Please be aware that the information provided here is not legal advice. Rather it is simply general information. All states have intricacies in their laws and any information given is simply information only and specifically is not intended to be, nor does it constitute, legal advice. This communication does not establish an attorney-client relationship with you.