I would like to know if there are any rules or guidelines regarding profit distributions from S-corporations. I am the owner and sole employee of an S-corp, and I already have determined what would be a reasonable wage given my job duties. Given my current situation, what is left after wages and expenses I would for now like to take as distributions on a monthly basis. Is there an upper limit on the what would percentage of profits would be considered reasonable?
I am trying to minimize my taxes like everyone else.
If my S-corp has profits and I do not take the cash out; does it increase my basis? Or do I need to pay taxes on it anyhow, so I should just pull the $$ out.
If I take the cash out as dividends, do I pay the same rate as capital gains on my personal taxes? Does it leave my basis intact?
If I take take out the cash as distribution, I understand it reduces my basis, but do I pay the same tax rate as I would for dividends?
This is all very confusing.
How can cash transferred from an S Corp to an LLC (partnership) increase the Partners Capital Account - basis in the partnership?
Is it possible to petition the IRS to audit an S corporation for not distributing profits appropriately? I am a 25% shareholder in an S corporation and have credible reason to believe profits are being buried. I cannot afford to hire a forensic accountant to audit the corporation privately.
Hello Linda , I saw some funny postings yesterday and I hope that sillypeople refrain from spoiling the value this web site adds.
Now to my question :
If I am a single owner / employee S Corp who made 25000$ last year and have 16K in payroll and 4K in expenses , why can't I take 5K in distribution ? And if I can , then how do I get it - do I give myself a 1099 MISC ?
Next questions is that if I do not take tis distribution, still I pay the taxes as pass through entity , so what is the deal about not taking the distribution ? I do not understand. Isn't it simple for me to even out by leaving the S Corp at 0 dollars on day one of the new calendar year ?