Quote:
Originally Posted by einreb
Per the previous comment, you can pay yourself salary and then 'bonus' money in a tax advantaged way. .
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Sorry guys...this is my line of work so I feel compelled to educate on the correct terminology. In an S Corp, you must pay yourself a reasonable level of compensation which will be reported on W-2 and taxed in the normal way. Excess S-Corp profits above what you pay out as compensation will pass through to the shareholder's 1040, and are taxed at ordinary income rates (no FICA, Medicare, etc.). Those profits can then be distributed to the shareholder's if desired with no further tax consequences. The distinction is compensation vs. distribution of corporate profit (a.k.a. dividends)