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We have an S-corp that is just starting to earn some profit.

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We have an S-corp...

We have an S-corp that is just starting to earn some profit. 1 spouse is 100% owner/director and does not participate in the scorp at all. The other spouse is earning income as a contractor for the scorp (not supervised by scorp etc as an employee would be). The spouse earning money has been getting paid monthly by the scorp (as a contractor) and the owner (passive) has been getting distributions from the scorp. They are equaling about the same. I was hoping to give the working spouse a 1099 so this person can pay their taxes and get credit for ss, etc., while the other person would not (the passive "real" owner/director has another job). Is this ok?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

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Submitted: 8 months ago.Category: Tax
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Answered in 12 minutes by:
11/20/2017
Tax Professional: PDtax, Certified Public Accountant (CPA) replied 8 months ago
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,086
Experience: 35 years tax experience, including four years at a Big 4 firm.
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Hi from Just Answer. I'mCustomer and can assist.

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Tax Professional: PDtax, Certified Public Accountant (CPA) replied 8 months ago

S corps need to maintain equal distributions to both owners to avoid the loss of s status. So you are correct to try to avoid that issue.

But a 1099 to match w-2 for one spouse/shareholder does not get this done.

One moment...

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Tax Professional: PDtax, Certified Public Accountant (CPA) replied 8 months ago

Had to re-read this. One passive 100% opener. Spouse does everything. The two spouse issue is different.

This looks good to me. The structure should be fine. A reasonable wage paid to a single s owner is all you need.

To finish, the 100% ownership with a wage is ok. It's because only there is no attribution to a non owning spouse.

Thanks for asking, and I'm glad you asked again. Positive feedback is appreciated. I'mCustomer

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Customer reply replied 8 months ago
To be clear, neither spouse is receiving a W-2. The non-passive spouse is receiving a 1099 from the S-corp. The passive spouse is not receiving any W-2 or 1099 (is just receiving distributions) from the S-corp.
Tax Professional: PDtax, Certified Public Accountant (CPA) replied 8 months ago

Then the passive interest should take a w-2. But my analysis holds even without the w-2.

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