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jfried
New Member

How often do I have to pay myself in any scorp? Does the salary have to be uniform or aligned in time with revenue or can it be arbitrarily timed (e.g. @ year end)?

 
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MichaelL1
Level 15

How often do I have to pay myself in any scorp? Does the salary have to be uniform or aligned in time with revenue or can it be arbitrarily timed (e.g. @ year end)?

There is no discussion I can find on how often you need to pay yourself.  Everything I find, just says if you are profitable, you must pay yourself a reasonable wage.  So, once a year, or throughout the year will work as long as it is paid, and it is reasonable wage for work preformed. 

Below are a couple articles that may be helpful. 

"The IRS will not object to the SCorp making zero payments to the owner employee when the business is earning little or no income. But, when the business is making money, it must first pay the owner-employee a reasonable compensation before making any payroll tax-free distributions with any excess funds."

For additional information click on, S Corp pays zero salary to owner.

"an S corporation must pay reasonable employee compensation (subject to employment taxes) to a shareholder-employee in return for the services the employee provides before a distribution (not subject to employment taxes) may be given to the shareholder-employee."

Source and more detail: https://www.nolo.com/legal-encyclopedia/s-corporations-salaries-an-irs-hot-button-issue.html






 

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3 Replies
MichaelL1
Level 15

How often do I have to pay myself in any scorp? Does the salary have to be uniform or aligned in time with revenue or can it be arbitrarily timed (e.g. @ year end)?

There is no discussion I can find on how often you need to pay yourself.  Everything I find, just says if you are profitable, you must pay yourself a reasonable wage.  So, once a year, or throughout the year will work as long as it is paid, and it is reasonable wage for work preformed. 

Below are a couple articles that may be helpful. 

"The IRS will not object to the SCorp making zero payments to the owner employee when the business is earning little or no income. But, when the business is making money, it must first pay the owner-employee a reasonable compensation before making any payroll tax-free distributions with any excess funds."

For additional information click on, S Corp pays zero salary to owner.

"an S corporation must pay reasonable employee compensation (subject to employment taxes) to a shareholder-employee in return for the services the employee provides before a distribution (not subject to employment taxes) may be given to the shareholder-employee."

Source and more detail: https://www.nolo.com/legal-encyclopedia/s-corporations-salaries-an-irs-hot-button-issue.html






 

augustvanhout
New Member

How often do I have to pay myself in any scorp? Does the salary have to be uniform or aligned in time with revenue or can it be arbitrarily timed (e.g. @ year end)?

Hey,

What they're talking about is the difference between your dividends and your salary.

You do not have to pay yourself necessarily. You're not required to start year one with a salary.

But... if you're going to pay yourself dividends, you need to be paying yourself at least equal their value in salary.

This is because dividends are taxed at a lower rate. If you were to pay yourself only in dividends, you would be short-changing the IRS. They want you to pay at least half in salary.
DreShervan22
New Member

How often do I have to pay myself in any scorp? Does the salary have to be uniform or aligned in time with revenue or can it be arbitrarily timed (e.g. @ year end)?

Not necessarily. If Im a computer programmer, and the average programmer earns $100,000 a year, but I am able to make $1,000,000... I can take $100,000 in payroll and $900,000 in distribution. I dont necessarily need to cut it 50/50. Thats not fair. Just because I am smart or hardworking and Im able to make $1,000,000 working 40 hours a week, does not mean I am required to pay payroll tax on half of that income. 

 

You pay yourself a payroll that is "reasonable" to the line of work you are in. 

 

Consult with an accountant to get a better understanding. But in no means, if your making $100,000 a year, does $50,000 need to run through payroll. You maybe working 18 hours a day to earn that $100,000 a year. Hope that makes sense.

 

Also, the original post is about how often you have to pay yourself payroll. Instead of example: $3,000 month payroll, the question is, can I pay myself a 1 time 36,000 payroll at the end of the year or once a year. 

 

Consult an accountant, but I dont see anything wrong with that. You are technically paying all your payroll/taxes in the current year. 

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