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Hi and welcome to Just Answer!If there is no self-employmet inconme - there woudl no SE tax liability. However - when income will be reported on 1120S - and If there will ne positive net income - the IRS will expect that S-corporation pays wages to teh shareholder - and there will be employment tax liability on the S-corportaion.
Sorry for typos..However - when income will be reported on 1120S - and If there will be positive net income - the IRS will expect that S-corporation pays wages to the shareholder - and there will be employment tax liability on the S-corporation.
As you might know - according to the IRS - S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee. The amount of reasonable compensation will never exceed the amount received by the shareholder either directly or indirectly.
Because income was already reported on individual tax return - you may try to avoid employment tax issue if S-corporation pays to the owner as a contractor and issue 1099MISC - so there will be NO income on S-corporation tax return and the taxpayer personally will have self-employment income. So - overall tax liability will be the same - but the person personally will pay both income taxes and self-employment taxes. Technically - that is not correct - but the IRS might accept as long as all income is reported and taxed.If S-corporation has relative large net income AND there is no wages paid by S-corporation, but such income is passed to teh shareholder via K1 - it is very likely that the IRS audits you and could assess employment taxes with penalties and interest charges. So - you might want to avoid such situation.
That what I would do in such situation to avoid employment tax assessment. That will not provide any difference in tax liability because actually employment taxes would be converted to self-employment taxes - and liability will be shifted from S-corporation to you personally. S-corporation will pay penalty for late filing of form 1099 - but that is a small amount.
Please be aware that technically - that is not correct - and the IRS still may apply penalty for not paying wages - but as long as all income is reported and all taxes are paid - that would be very unlikely.