S Corp. Distribution

  • Thread starter Verizon Customer
  • Start date

V

Verizon Customer

Hello, I've owned an S corporation for less than a year now. The next
quarter is approaching thus I've a question.

Apart from the salary I've been paying myself, I of course am looking at
distributing the profits to myself so's to avoid the dilemna of double
taxation (being the sole owner that is).

Question: Can this distribution to myself be done in one lump sum at the end
of the year? Or should I be doing so on a leveled basis throughout the year?
(I'm looking at next year as well, so's to know how to approach this when
the time comes).
 
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J

John H. Fisher

Hello, I've owned an S corporation for less than a year now. The next
quarter is approaching thus I've a question.

Apart from the salary I've been paying myself, I of course am looking at
distributing the profits to myself so's to avoid the dilemna of double
taxation (being the sole owner that is).
Question: Can this distribution to myself be done in one lump sum at the end
of the year? Or should I be doing so on a leveled basis throughout the year?
(I'm looking at next year as well, so's to know how to approach this when
the time comes).
Yes, in any case, you would have a taxable distribution of
net profits. It doesn't make any difference when, in the
course of the year, you take them.

"Jack" - John H. Fisher - (e-mail address removed)
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=:)
 
P

Paul

Verizon Customer said:
Hello, I've owned an S corporation for less than a year now. The next
quarter is approaching thus I've a question.

Apart from the salary I've been paying myself, I of course am looking at
distributing the profits to myself so's to avoid the dilemna of double
taxation (being the sole owner that is).
There isn't any "double taxation" in an "S" corporation as
the profits (or loss) is included in (or deducted from) your
income on your individual income tax return.
Question: Can this distribution to myself be done in one lump sum at the end
of the year? Or should I be doing so on a leveled basis throughout the year?
(I'm looking at next year as well, so's to know how to approach this when
the time comes).
Distributions from an "S" corporation can happen at any
time. As far as your questions go, you should seek the help
of a qualified CPA or EA in your local area that can give
you more specific answers, as there are also state and local
issues to contend with.
 
K

Katie Jaques

Verizon Customer said:
Hello, I've owned an S corporation for less than a year now. The next
quarter is approaching thus I've a question.

Apart from the salary I've been paying myself, I of course am looking at
distributing the profits to myself so's to avoid the dilemna of double
taxation (being the sole owner that is).

Question: Can this distribution to myself be done in one lump sum at the end
of the year? Or should I be doing so on a leveled basis throughout the year?
(I'm looking at next year as well, so's to know how to approach this when
the time comes).
There is no double taxation of S corporation income; that's
the whole point. Your salary is deducted in calculating the
net income of the corporation, which passes through to you
on Schedule K-1 at the end of the year. All of the
corporation's net income (to the extent of your percentage
interest in the corporation, which I assume is 100%) is
taxable on your individual income tax return, whether it is
distributed to you in cash or not. The amount and timing of
cash distributions of income have no income tax effect.

You need professional help ASAP. It is clear from your
question that you do not understand how S corporations work.
Please be sure that you have a valid S election on file,
for starters.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.
 
H

Herb Smith

Verizon Customer said:
Hello, I've owned an S corporation for less than a year now. The next
quarter is approaching thus I've a question.

Apart from the salary I've been paying myself, I of course am looking at
distributing the profits to myself so's to avoid the dilemna of double
taxation (being the sole owner that is).

Question: Can this distribution to myself be done in one lump sum at the end
of the year? Or should I be doing so on a leveled basis throughout the year?
(I'm looking at next year as well, so's to know how to approach this when
the time comes).
First, you need to talk to a tax professional or CPA, to be
sure that your first years reports are done correctly.
Obviously, you missed an important element of being a
shareholder in an S-Corp. An S-Corp DOES NOT pay taxes or
claim losses directly, they are "passed through" to the
shareholders via a K-1 form.

Whether or not you actually distribute the profit (cash) or
not, you will be responsible for the tax liability (or
loss). The salary you are paying yourself will be reported
to you on a W-2 form, and the income tax withholding, SS and
medicare taxes are reported by the S-Corp.

Better get to that tax professional ASAP!
 
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R

Robert J. Romano, CPA

Hello, I've owned an S corporation for less than a year now. The next
quarter is approaching thus I've a question.

Apart from the salary I've been paying myself, I of course am looking at
distributing the profits to myself so's to avoid the dilemna of double
taxation (being the sole owner that is).
Whether you give yourself a distribution or not, you will
not be double-taxed.
Question: Can this distribution to myself be done in one lump sum at the end
of the year? Or should I be doing so on a leveled basis throughout the year?
(I'm looking at next year as well, so's to know how to approach this when
the time comes).
You can give yourself a distribution any time of the year
you want and at any frequency you want.
 
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