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mw30
Level 2

S corp owner pay

Dear Sir,

 

I have a question about owner pay salary, as one person LLC owner I will elect tax as S corp in 2020. Can I pay myself a salary and some amount of distribution?  Thanks. 

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Accepted Solutions
tagteam
Level 15

S corp owner pay


@mw30 wrote:

I will elect tax as S corp in 2020. Can I pay myself a salary and some amount of distribution?  


S corporations must determine and report appropriate and reasonable salaries for shareholders and officers who perform more than minor services for the corporation.

 

See https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-a...

 

See also https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...

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5 Replies
tagteam
Level 15

S corp owner pay


@mw30 wrote:

I will elect tax as S corp in 2020. Can I pay myself a salary and some amount of distribution?  


S corporations must determine and report appropriate and reasonable salaries for shareholders and officers who perform more than minor services for the corporation.

 

See https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-a...

 

See also https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...

View solution in original post

mw30
Level 2

S corp owner pay

I filled the form 2553 with Federal for the election. Do I need to inform the state to make a change?  or do I need to do anything? Thanks

tagteam
Level 15

S corp owner pay


@mw30 wrote:

I filled the form 2553 with Federal for the election. 


Form 2553 is filed with the IRS so that your entity is treated as an S corporation for federal income tax purposes only. As far as the state is concerned, your entity is still registered as an LLC.

Anonymous
Not applicable

S corp owner pay

it's not that you "can" pay yourself a salary. The IRS insists on it.  I suggest before year-end you consult with a tax pro.  "Reasonable" is nowhere defined in the Code. It's more a result of court cases and depending on where the business is and what you do "reasonable" can vary substantially.  the pro should also prepare the first-year return so you get an idea of what's needed as to record keeping and filing requirements other than payroll tax returns such as sales tax. maybe you need workman's compensation insurance   Mess up the first year and it then becomes expensive to fix. 

mw30
Level 2

S corp owner pay

As a day trader, I elect the MTM election for the coming year. but don't know where is the correct address to send to IRS. thanks

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