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I am a real estate broker in California. I recently formed

I am a real estate...
I am a real estate broker in California.

I recently formed a S Corp. I am the only share holder.

My wife works with me as a real estate agent (she is technically an independent contractor).

I want to start receiving a pay check.

I want my wife to start receiving a pay check.

I would like any earnings left in the account at year end to be "redistrubuted"...but I dont understand the tax consequences for this since the money that would remain in the account would be used for future payrolls and it would have already been taxed...I think.

Please help.

Thanks,

Mike
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Answered in 3 minutes by:
10/18/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

Hi, Mike - the cash that is left over in your account can be used to reinvest in the business or pay expenses

Megan C :

You will not have to pay tax on that money again

Megan C :

You only pay tax on the profit of the business

Customer:

so we would claim the "redistribution" on our personal taxes?

Customer:

Does it matter that my wife is not a share holder?

Megan C :

No, you do not claim any redistribution on your personal taxes. You just pay tax on the profit of the business. What you do with that profit is up to you after that

Megan C :

No, it doesn't matter that your wife is not a shareholder - she can still earn a salary from the business.

Customer:

and when I say "redistribution" i mean...leave it in the account to account for future payroll.

Megan C :

That's fine...you aren't taxed on that

Customer:

this may be another question...but...when we each receive a salary...am I the only one paying self employment tax?

Megan C :

With an S Corp you don't pay self employment taxes. You pay payroll taxes (same thing) but you pay them both on your salary and your wife's salary

Customer:

but the money that would be left over would not pay self emplo0yment on

Customer:

right

Customer:

?

Megan C :

That is correct. You only pay that tax on the salary

Customer:

thank you for your help :)

Megan C :

You're welcome.

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C and 87 other Tax Specialists are ready to help you
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Thanks, Mike for your positive rating. Please come back and visit me any time you need a tax question answered. It was a pleasure working with you today.
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Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
16,581 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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