gloriah5200
Expert Alumni

Deductions & credits

If it continued to happen each year, it would look like disquised wages trying to save paying employment taxes on them and could draw IRS attention and cause them to want to "recharacterize them" as wages.

 

You need to have notes on it in the annual minutes of the corporation and documentation, in case IRS sends you an "inquiry" correspondence.

 

Generally, C Corporations pay dividends, not S Corporations.