"Unfortunately for them the IRS accounts for this hack, and if an IRS audit finds the salary isn't reasonable then those amounts will be subject to payroll, soc

"Unfortunately for them the IRS accounts for this hack, and if an IRS audit finds the salary isn't reasonable then those amounts will be subject to payroll, social security, medicare, potentially higher income tax, and moving forward affordable care act taxes plus penalties and interest. " My experience over time with many business people has shown that since we are not talking about a criminal action but an action that will result in only penalties, interest etc. it is probably a chance worth taking. This is a frequent occurrence in business in other areas. You have to take your chances and you determine the chances that you take by looking at your comfort level (which is different for everyone) with the potential downside and probability of that downside happening.