Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
The workers compensation
people are not attorneys or wage
experts, so they told you only partial information. There is no law saying all officers of a corporation (S-Corp or C-Corp) must make at least $24,000 per year. However, the IRS will look at the S-Corp owners trying to hide wages and mischaracterize them as dividends or profit sharing to try to avoid paying taxes.
For example, a US Tax Court held an employer cannot avoid federal taxes by characterizing compensation paid to its sole director and shareholder as distributions of the corporation’s net income rather than wages. See: Veterinary Surgical Consultants, P.C. vs. Commissioner, 117 T.C. 141 (2001).
Furthermore, the $24,000 is NOT a magical number either. The courts have held in one case where a corporate officer/shareholder received wages of $24,000 per year and large distributions that there was no dispute
that the shareholder was an employee, but the issue dealt with the reasonableness of the wage amount. When challenged on the reasonableness of the wages, the taxpayer contended that the corporation only intended to pay wages of $24,000 and that its intent was controlling. The court held the test is whether the payments received by the shareholder were truly remuneration for services performed, thus the intent to limit wages is not a controlling factor. See: David E. Watson, PC vs. U.S., 668 F.3d 1008 (8th Cir. 2012).
So, what this means and what the workers compensation carrier is trying to convey is that you must pay yourselves as owners a reasonable wage based on the work performed by you and your husband.