Am I on crack, or do the perceived tax savings via S-Corp
distributions really not matter at a certain level of business income?
You're not on crack. Generally, if all the income is generated by your own personal services - this is the outcome.
The benefit of S-Corp is when you have employees who generate your income, and you distribute to yourself profits that come out of other's personal services. In this case your distributions are exempt from FICA since it is not in fact a self-employment income. You'd still have to pay yourself a reasonable salary for your position (as a manager/officer), but it wouldn't have to cover all of the available profits.
So if the IRS takes a position against you it would be that your salary should be to include the whole profits, since it is the compensation to you for the personal services that produced the income to the corporation (you). In many cases they might agree that a salary at the SS maximum limit would be reasonable - but that's only a speculation of mine. In that case you might gain some portion of the medicare tax (with the recent law changes at the levels you're talking about you'll pay some medicare anyway).
There are a lot of accountants who take more aggressive position saying that not all of the distributions are liable for SE taxes, even if you're the sole employee of the corporation. These cases often end up in the Tax Court, and whatever the outcome, your legal fees become higher than the FICA savings.
What is probably missing in your picture is the SS limit of (currently $112K) above which you don't pay social security tax, so whether you get it as a salary or as a distribution - that limit is the same. That is why you don't see a significant difference.
I know there are a lot of accountants who'd disagree, but I would argue that for a sole employee of your company, S-Corp doesn't provide significant benefits over the disregarded LLC taxation, but has some additional overhead that adds to your expenses.
Here's a link to a lawyer's blog where he suggests (and says many accountants follow) 60/40 division between salary and distributions. I.e.: his take, similarly to mine, is that most of the earnings have to be treated as salary. In your case, when the total is about 300K - you indeed will not get any FICA savings with such a division other than some of the medicare.
Unusually low wages when compared to distributions can draw unwanted
IRS scrutiny and an audit. An unfavorable audit will likely result in
some portion of the distributions being reclassified as earned income
for federal income tax purposes, which results in a deficiency
assessment (i.e., a tax bill), interest on those unpaid taxes, and IRS
The article also talks about the Watson case (one of the Tax Court cases I referred to), which can be used as the guidelines for determining the "reasonable" compensation.
Talk to your tax adviser.
I'm neither a tax adviser nor a tax professional. For a tax advice contact a CPA/EA licensed in your state. This is not a tax advice, just my personal opinion.