An S-Corporation (or an LLC taxed as such) issues all of the owners/members a K-1 which reports their share of income, gains and losses, distributions to owners, and other information needed to be reported on the shareholder's tax return.
To prevent S corporations and their shareholders from avoiding payroll taxes by maximizing distributions and minimizing compensation payments, the IRS requires S corporations to pay shareholders who provide substantial services reasonable compensation. This means that, as an owner, you also have to treat yourself as an employee, and pay yourself as an employee. That also means withholding taxes, social security, and Medicare. It also means reporting those payments on a Form W-2. If your S-Corp's profit is not significant, you may be able to get away without paying yourselves a salary, but if you're making money, you should start paying yourself a "reasonable" salary right right away.
Do not issue yourself a Form 1099-NEC or 1099-MISC.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
