Hello,
I have a S Corp and i am the sole owner. I pay myself a 20k W2 salary. (I believe it is low - i want to change this in 2025)
My S-corp have a revenue of 250k this year. The business deductions were about 100k (This includes the 10k salary). That gives me a net of 150k Profit.
After I did my tax in turbotax, i have a K1 of approximately 150k.
My questions,
1) So i paid myself a 10k W2 salary, but this K1 itself has 150k. So my personal tax return actually have 160k as income. Suppose the numbers are the same next year, so why should I increase my W2 salary to 100k and take a K1 of 60k? Net Net it seems to be the same on my personal return. I am still liable to pay 160k income tax.
2) Using the same numbers, suppose I add a distribution withdrawal of 100k, with my 10k salary, i will end up having a K1 of 50k. Is this 100k distribution taxable on my personal income tax return?
3) How do you determine if you should have a "bigger K1 value w/ Smaller Distribution" , versus a "bigger Distribution value w/ smaller k1 end of year value"?
thanks
