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Taxtom
Taxtom, Accountant
Category: Finance
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Experience:  25 Years in preparing Personal and Business Tax Retuns
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If my S-corporation earns a profit, but I choose to leave the

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If my S-corporation earns a profit, but I choose to leave the money in the business and not take a dividend, how is that money taxed at the end of the year? Do I need to pay employment taxes on the money?

Taxtom :

Hello, The money is taxes as if you received the a distribution. There are no emplyment taxes on the distrubution only on the wages you receive as an employee of the corporation. Once caution, if an owner of s-corporation does not take a resonable salary and takes distributions instead the IRS can recatagorize the distribution as wages and charge the employment taxes. Thank You Tom

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