I'm trying to teach myself some basics of taxes and returns, so I can do them myself next year. My wife owns a small LLC (S corp), which her accountant did taxes for last year (and will this year too). While going through them, on the Schedule K line 6d is Owners Distribution (also listed again on the K-1). Is this the same as what she took in pay from the business (is the K-1 essentially like a W2 but just for the owners pay?) and if so, how and where would I place that information on our personal returns? I would assume NOT on a schedule C on our personal returns (which is where my income is listed as I am also self employed) because her business taxes would be filed separately as past years, correct?
Furthermore, I found this article here: http://smallbusiness.chron.com/shareholder-distribution-vs-payroll-59898.html that half way already answers this question, but it I didn't fully understand it and it did bring up another one. It kind of "implied" (if I understood correctly) that this income is tax avoidable as the article stated "this income is not subject to self-employment income for the recipient".
So to sum up...
1. Is the K-1 her reported income which has to match on her/our personal taxes?
2. Where (what form) do we report that income on our personal taxes?
3. Did I understand correctly that this income could be tax avoidable?
