"even though they did pay the owner a small salary (higher than most employees). There was no loan document, so this definitely falls into distributions."

You might give this person some guidance, that the IRS can look at taking $80k with some small salary, and recharacterize all of that as Wages. You need to find out what this person is thinking when they use these tactics, because they are going out of their way to create exposure legally and for IRS purposes. It's even worse, when they pay personal expenses directly from the corporation; I use the term "discoverable" as in, if you are dumb enough to pay your children's private school tuition from the corporate bank account directly, you deserve it when the IRS notices.