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I have owned a S-Corp for about 6 months now. I am the acting

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I have owned a S-Corp...
I have owned a S-Corp for about 6 months now. I am the acting president and only shareholder and employee in the company. As of yet I have been unable to give myself a salary and have even transferred money into the business account from my personal account. From what I understand, here in Florida, it is mandatory to pay salary to all S-Corp employees. Is this going to be a problem when my tax year ends?
Submitted: 8 years ago.Category: Tax
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8/3/2009
Tax Professional: Merlo, Accountant replied 8 years ago
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Hello angel,

The IRS requires that S Corporations pay the shareholders a reasonable salary in connection with their services. However, this is assuming that the business is making a profit and has the funds to pay a salary.

An S Corporation is the only tax entity which is allowed to declare some of the company profits as dividends, which are not subject to SS and Medicare taxes. Because of that special rule, the IRS wants to make sure that S Scop shareholders do not try to dodge the SS and Medicare taxes by declaring no salary or a small salary, and then declaring the rest of the profits as dividends. As long as you are not reporting any dividends being paid to the shareholders, then not paying yourself a salary is not an issue.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you angel.

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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