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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Resolved Question:

If a client owns 98% of a C-Corp. Draw $45,000 and charges it to Cash Distribution is this correct?
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.

Hello gary,


Regardless of whether or not the client is set up as a C Corp or an S Corp, an owner cannot simply take a "draw" on profits. Instead the money needs to be classified as either wages or dividends and charged to the appropriate account, with appropriate taxes withheld.


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