You are supposed to take a reasonable salary for your services to the corporation each tax year and can pay yourself some amount from annual earnings over and above the amount of your salary. You pay tax on your S corporation's annual income (net profit) regardless.
Any excess you pay yourself, over and above your annual combined salary and distribution from earnings, is considered a return of capital and non-taxable to the extent of your basis (if the distribution then exceeds your basis, that portion would be capital gain).
