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S corp is a “pass-through” entity for tax purposes; the income of S corp is passed through to their owners and reported on the owners’ personal income tax returns. (In contrast for C corp the net business income is subject to corporate income tax, and the remaining funds are taxed a second time if distributed as dividends to members) For S corp, only the salary paid to the employee-owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax.
Consider example. In keeping with the industry standard, you decide that a reasonable salary for your work (based on the time spend and qualification) is $35,000. Your total earnings for the year are $60,000: $35,000 paid in salary are subject of employment tax - $5,355 (15.3% of $35,000). The remaining $25,000 paid as a distribution from the S corp.