I am the co-owner of a small S-corporation - can I pay "reasonable officer compensation" via 1099-MISC? Does it have to be via W-2? Or is there another method?

[llamaoflife1234]

I co-own the S-corporation (50/50 ownership with one other person).  It's small and the actual operation and service we provide is only active for 7 days out of the year.  The planning and preparation is longer but we planned to only take payment once a year.  We don't have W-2 employees and we only have contractors that we pay one time - most contractors are paid under $600 and the few contractors who are paid more than $600 receive 1099-MISC.

Whether or not it's completely relevant - the profits / ordinary business income is  modest and, in my opinion, doesn't seem to justify a payroll service.  The "reasonable" amount of money for officer compensation is under $600 and the amount of ordinary business income is be on the order of $1000-$5000 depending on the year.

Questions:

(1) If my reasonable officer compensation (to myself and to the other owner) is under $600 per officer can I pay it and not do any specific or special reporting? Obviously that income would get reported on my personal income taxes and I would pay tax on it based on my income bracket

(2) If my reasonable officer compensation is above $600 per officer, could/would/should I report it with a 1099-MISC?  That income would then also still get reported on my personal income taxes and I would pay tax on it based on my income bracket.

(3) Do I have to issue a W-2 and pay payroll taxes regardless of the amount and frequency of officer compensation?

[WillK]

The IRS has strict rules an guidelines about S-Corporations and the owners needing to pay themselves a reasonable salary which should be reported through payroll meaning a W-2, it doesn't matter the amount or frequency, but payroll needs to be run and payroll taxes need to be paid for the officers of the company. 

Click the following link to read more form the IRS on this issue: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...

[llamaoflife1234]

Thanks @TurboTaxWill !  I'm still collecting info and I understand what you're saying, in particular about the "reasonable salary"... but am I wrong in thinking that I can avoid W-2s by paying estimated tax and submitting 1120-Ws during the year?  This page seems to indicate that S-corp owners taxes are not done via W-2 (or perhaps that they don't have to be done via W-2): <a rel="nofollow" target="_blank" href="https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations">https://www.irs.gov/bu...>

[llamaoflife1234]

Nevermind I confirmed that the W-2 is indeed necessary as you said originally.  Thanks again

[hatchjsb]

owner compensation of a small x- corporation  do I 1099 this compensation

[AliciaP1]

No, as an owner/employee of an S-Corporation you are required to pay yourself a reasonable salary and report and pay applicable payroll taxes throughout the year.  This activity results in issuing yourself a W-2 at the end of the year from your S-Corporation.

Please see S Corporations for more detailed information.

@hatchjsb