Posted by Dave T on July 19, 2004 at 20:47:34:
Income from your S-Corp is considered distributed at the end of the tax year. Even if the money stays in your business checking account, you are considered to have “earned” all of the S-Corp income as self-employment income.
An S-Corp can also declare a dividend. Pay yourself a reasonable salary, and declare the rest of the corporate income as a dividend to reduce your self-employment income tax bite.
Simple concept…thick head… - Posted by JP(SC)
Posted by JP(SC) on July 17, 2004 at 07:20:19:
I’m too much of a dope to comprehend this…
I understand and have read all about how an S-Corp shareholder can avoid paying employment taxes on part of their income as long as their salary is reasonable. Does this apply only to income that has actually been distributed? If I don’t pay myself ANY salary and don’t have ANY dividends (b/c I want to leave the money in) isn’t this a moot issue? I know that the income of my S-Corp passes onto my personal tax return and is taxed at my individual rate. Are employment taxes even an issue if no money leaves the company?
Thanks.
JP