@kiddkevin01 wrote:
Thanks for your reply.
How about on the IRS side?
How does IRS know or confirm that I have that income if there is no communication between IRS and the company that paid me?
If you are an owner of the S-corp, you must take a salary for your work that is fair and reasonable for the work you do. The S-corp must withhold income tax and payroll taxes and give you a W-2. You report the W-2 on your personal tax return. You must be paid a fair and reasonable salary before you can take a profit distribution. (If you are a passive owner and don't perform material work, you don't need to take a salary.)
Additionally, the S-corp must file its own tax return form 1120S. This tax return will identify all the owners who get profit sharing, and the owners will all be issued a K-1 statement. Both the K-1 statement and any W-2 will be entered on your personal tax return. Note that form 1120S must be filed by March 15, not April 15, and there are substantial late fees if you don't get an extension.
