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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 585
Experience:  10 years experience
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I have a subchapter S company with myself as owner and sole

Customer Question

I have a subchapter S company with myself as owner and sole employee. I am paying myself a payroll but have plenty of money left over after paying myself. What is the best thing to do? Simply pay it all out in payroll, declare as much as possible as a distribution, or some other strategy. What would minimize my taxes?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
As long as S-corporation pays you a reasonable wages - you are OK.When S-corporation realizes an income (after deducting wages and other qualified expenses) - that taxable income is passed to you on K1 - and included into your other personal income. That is regardless if distributed or not and regardless how the money are used.Th advantage is that such income is NOT subject to employment tax - compare to wages - so as long as you are paid reasonable wages - that woudl be more beneficial to minimize your tax liability.If you simply pay larger wages - S-corporation will pay larger employment tax.You may defer some tax liability if either you or S-corporation start contributing into retirement plan - tax liability on such contributions and investment earning woudl be deferred to future years when you start distributions.