ThomasM125
Expert Alumni

Business & farm

@Myrrhia

 

The payments you are making would be considered shareholder distributions, as I am assuming you did not report them on a 941 or 944 payroll tax return.

 

To be considered a salary payment from your S corporation to you, you need to report the payment on a W-2 form and file form 941's quarterly to pay in the taxes associated with your salary. You are treated the same as an employee that would work for the company.

 

The distributions you have been making to yourself are not deductible by the corporation if you did not treat them properly as wages. What will happen if you do nothing further, is you will pick up the income of the S corporation as pass-through income as opposed to wage income on your personal tax return.

 

If you want to correct the situation for 2021, you would have to report the wages on a W-2 form and file the associated form 941's or 944. 

 

In either case, you will get credit for the taxes you have paid in on your personal tax return, as estimated taxes paid in.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"