Thank you for all your inputs. Please help me clarify if im understanding taxing on the shareholder distribution portion correctly.
If i have an Scorp and say it makes $100 in income.
I then pay myself in W2 $60
with the remaining $40 in profit i want to do $20 in shareholder distribution.
When I go over to my personal income tax , will i be paying tax on $60W2 and K1 $20?
Or, will i have to pay personal in come tax on $60 W2 + $40 even if im only distributing $20 to myself?
I hear the shareholder distribution is not taxed? or is it just not taxed at the Scorp level ?
It seems that once i entered the $40 net income from the scorp K1 into my personal tax, the entire $40 combined with any W2 amount is taxed, not just tax on $20 in shareholder distribution.
If, indeed, the total net profit , all of $40, is taxed at the personal level, and i only distribute $20 this year. In later year when i distribute the rest it would not be taxed?
I hope my example is not confusing. Any help you can provide is greatly appreciated.
