USA Year End Extra $ Help

[barbq]

We are a LLC that files taxes as an S Corp. We will have a surplus of cash at the end of the year (2018). How can we handle this so the surplus is not taxed between the two owners? Our accountant usually splits the year end cash between the two owners and it is added to each as "income," I believe. Should we take a distribution each instead of leaving the surplus in the checking account? Thanks for any help.

 

[kirby]

Depends on why there is a surplus of cash. If the surplus is there because not all of the year 's income has been distributed to the owners then that could be the reason because 100% of the year's income has to be taxed to the owners. But if the surplus is there due to some non income reason then it is likely the surplus should not be taxed as income .So you need to ask the accountant about this.

 

[barbq]

Thank you for responding. We've paid off all of our vendors and have leftover cash. We wondered if there were some way to keep the cash in the checking account to carry over to next year without it being taxed - or should we write a check to each of the owners since it would be taxed anyway?

 

[kirby]

You are going to be taxed on cash that came from income whether it gets distributed to you or left in the S Corps checking account. So you might as well write a check.

 

[barbq]

Thank you. That was exactly what I wondered. Happy New Year!