S Corp Distributions / Salary

[Tmayer2]

Okay, so I do consulting on the side (my employer knows) and have an s-corp for that. For simplicity let's say:

I have 50,000 in net income. I distributed 40,000 of that to myself. However, it seems like I am supposed to pay some of that as "salary". 

a) If I pay SE Tax on the 40,000 do I need to declare it as salary?

b) On my 1120-s if I say 20,000 of it was salary... what number do I put in the distributions. Should it be 20k or 40k?

I am very confused on this.

[M-MTax]

1. Are you doing your 1120-S right now for 2023? It's really late if you are and you need to see a tax pro if that's what's happening.

2. If this is for 2024 you need to pay yourself a reasonable salary for services you performed for your corporation. You need to decide what's reasonable for the services you performed.

[M-MTax]

a) If I pay SE Tax on the 40,000 do I need to declare it as salary?

That's not the way it works. What's supposed to happen is you pay yourself a salary and file quarterly 941s for payroll taxes. You should see a tax pro if you haven't been doing that.

b) On my 1120-s if I say 20,000 of it was salary... what number do I put in the distributions. Should it be 20k or 40k?

The amount on Line 1 of your K-1 from your S corp is ordinary income and that number is taxed at ordinary income tax rates. The number on Line 1 of your K-1 does NOT include your salary. The salary you take will be deducted from your corp's ordinary business income.

[Mike9241]

reagrdless of whether this is 2023 or 2024 return see a tax pro for guidance. for 2023 not only is your return late which can incur penalties but you also face a slew of penalties for failure to file payroll tax returns and remit the payroll taxes. If your state also has income taxes you face additional state penalties.  For 2024 you also late in filing quarterly payroll tax returns and remitting payroll taxes.  A pro looking over your entire situation can offer the best advice.  It also seems you are not familiar with preparing an S-Corp return. Another reason to consult a pro.