A relative of mine is an IRS auditor for small businesses. The cheating S Corps, as described by tptacek, take up the majority of his time. I got the same description from him, and he also said doctors were the biggest offenders.
If anyone is doing this, or interested in doing this, the way they deal with these cases is as follows: he picks a number based on a combination of what salary surveys say and what kind of mood he is in, multiplies it by 7 (since you've probably been doing this for 7 years by the time he gets it, which is how far they can go back), and assesses that as unreported income. They then tack on penalties and interest for the tax liability of said income. That makes for a really bad day.
If anyone is doing this, or interested in doing this, the way they deal with these cases is as follows: he picks a number based on a combination of what salary surveys say and what kind of mood he is in, multiplies it by 7 (since you've probably been doing this for 7 years by the time he gets it, which is how far they can go back), and assesses that as unreported income. They then tack on penalties and interest for the tax liability of said income. That makes for a really bad day.