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Thanks for your reply. Just to be sure I understand you correctly, which one (if any) is true: If an S-Corp makes money, it is assumed that the earnings are di

by DenisM 16y ago

Thanks for your reply. Just to be sure I understand you correctly, which one (if any) is true: If an S-Corp makes money, it is assumed that the earnings are distributed and thus both personal income tax (on the entire earnings amount) as well as payroll taxes (on the reasonable wage) have to be paid. Or: If an S-Corp makes money, it is assumed that the earnings are distributed and the personal income tax has to be paid (on the entire earnings amount), but payroll taxes don't need to be paid.

camz 16y ago
Option 1 sounds about right. All distributions are going to be tax on your personal income tax and exempt from payroll taxes. Reasonable wages are NOT corporate distributions, they're simply wages paid by the corporation and deducted as an expense. The payroll taxes would be paid on the amount that you deem wages through the corporation. Please note, payroll taxes are also deductible. hope this helps