Yes. It may cause issues with the IRS if you do not properly allocate your compensation.
To properly allocate your earnings and avoid double taxation, do the following:
- Identify when during the year you elected to file as an S-Corp
- Report any earnings as a sole proprietor on Schedule C (subject to self-employment tax)
- Report any earnings as an S-Corp on Form 1120-S (not subject to self-employment tax)
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