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Category: Finance
Satisfied Customers: 4673
Experience:  Tax professional and business consultant for 35 years.
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I have a question regarding one of my tax customers, this is

Customer Question

I have a question regarding one of my tax customers , this is whats happening he has a small cleaning business he has a s corporation he pays him self $700 dlls weekly so $2800 dlls monthly he has his w2 at the end of the year but also he takes dividens like 20 thousand evey 3 months that is 80 thousand per year my question is if he has pay taxes on the 80 thousand i mean do i neer to add that income on the personal tax return the 80 thousand because i don't see those on the profit and lost statement so not sure what to do
Submitted: 1 year ago.
Category: Finance
Expert:  PDtax replied 1 year ago.

Hi from Just Answer. I'm PDtax. I'll assist.

Your client gets W-2 wages and $0 dividends from his S corp. The S corp reports the business income and expenses, and the net income is passed through to the owner via form K-1. he then reports all of the other income on his personal return.

Lots of S corp owners take a base wage and a draw like your client did. The draws are NOT dividends. They are just draws against his income for the year.

The $80,000 might be approximately the S corp income for the year. It's pretty common that the owner will draw all the unneeded cash. But the S corp income might be only $77,300. That's the number to report on page 2, Schedule E, from the S corp.

Thanks for asking at Just Answer. Please rate my assistance when you accept my answer. I'm PDtax.

Customer: replied 1 year ago.
I mean the gross income was 240 thousand , the wages were $36400.00 and the dividends were 80 thousand and the expenses were $43200.00 so the profit were $$80400.00 so what do i need to report just the $80400 or the 80400 plus the 80 thousand plus the wages ?
Expert:  PDtax replied 1 year ago.

That means the owner reports 160400 s profit plus 36400 wages. The dividends are not a deduction.

Please rate my assistance when you accept my work. I'm PDtax.