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Brian Michels
Brian Michels, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 161
Experience:  Partner at Michels & Hanley CPAs, LLP
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I have distributions of $21K in my S-Corp for last year. My

Customer Question

I have distributions of $21K in my S-Corp for last year. My profit after these distributions is $800. Do I have to list $21K as salary or is it low enough that I can just call it distributions?
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Customer: OK
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Customer: That's it.
Submitted: 5 months ago.
Category: Tax
Expert:  Brian Michels replied 5 months ago.

Hello. My name is ***** ***** I'll be the Expert assisting you today. Did you pay yourself a salary subject to payroll taxes in 2016? If you did not pay yourself a salary through wages in 2016 than you wouldnt classify them as wages / salary. They would be considered distributions. Payroll taxes would have to be filed and a W-2 / W-3 would have had to been filed back at the end of January 2017 for the year end December 31, 2016. There is an incentive for an S Corp to pay little or no wages to shareholder employees because flow through income from the S Corporation is not subject to self employment tax. If there are distributions from an S Corp and $0 in wages the IRS could re characterize those distributions as wages and you could be responsible to pay back payroll taxes on this. You should keep this keep this in mind going forward during the 2017 tax year. I hope I’ve provided the information you were seeking. If you are happy with my service, your 5-star rating at this time is most welcome. If you need more help, please let me know so l can continue to assist you.

Customer: replied 5 months ago.
Are you saying I don't have the option now to claim "Officer Compensation?" No I haven't filed payroll taxes but I'm filing income taxes now and rather "make it right" then double down by filing my 1120S incorrectly. That said, since my amounts are so small, will the IRS likely care this year?
Expert:  Brian Michels replied 5 months ago.

That is correct, unless you go back and file late payroll tax returns including Form 940, Form 941 and your state payroll tax return. You can only claim wages on the business income tax return if they were in fact wages that were reported through payroll tax returns filed with the IRS / State. I can't advise you on whether the IRS would re characterize the income but based on the facts presented it should not be deducted as wages on the business tax return.

Customer: replied 5 months ago.
OK, thank you.
Expert:  Brian Michels replied 5 months ago.

My goal is to provide you with excellent service. If you're satisfied with my assistance, your 5-star rating at this time is appreciated. If you have any further questions, don't hesitate to ask!

Expert:  Brian Michels replied 5 months ago.

I wanted to follow up and see if you had any further questions. If your question has been resolved I would appreciate your feedback rating so I receive credit for the response. Thank you

Expert:  Brian Michels replied 5 months ago.

I wanted to follow up and see if you had any further questions. If you have questions I am happy to assist. If you have no further questions I would greatly appreciate your 5 star rating so I receive credit for my responses. Thank you.

Customer: replied 5 months ago.
i gave you a 5 star rating. I hope that is enough to end the text messages and emails.