On Federal Taxes & other Accounting Issues Hot Topics! Choosing the Right Health Care Account  The IRS is looking for S corporations that fail to pay reasonable salaries to shareholders who perform services for the corporation. The failure to pay adequate salaries—or any salary at all—to shareholder-employees (SEs) is a “red flag” for an audit. But what is considered "adequate compensation? Who are Employees & What Employee Records Must Employers Develop & Keep? - from the IRS website