Business & farm

You report $14,000 of ordinary income and $5,000 of W-2 income on your current year return. The amount that you distribute to yourself is not relevant; you are still taxed on both amounts.

 

The IRS can always recharacterize some or all of the $14,000 if they do not believe the $5,000 is a "reasonable salary" for the services you perform for the corporation.