Let's say in a hypothetical situation I am the sole shareholder of a C-Corporation. In year 1, let's say it makes $200,000. It pays me a salary of $60,000. The other $140,000 is profit and retained in the company. In year 2, it makes $0. My question is: can I just take $40,000 in dividends out? Or do I have to pay myself a reasonable salary first, out of the previous years profit, before I can pay dividends?
I'm just trying to come up with a way to alleviate the tax burden of a spike in income by spreading it out over multiple years. I would like to be able to just pay the dividends in year 2, since they have 0% additional tax (with a taxable income of around $44,000). Having to pay salary again would mean I pay payroll taxes and income taxes on it, on top of the 21% corporate tax rate I paid on it in year 1.
