Comments on: Paying Zero S Corporation Shareholder-Employee Wages

By: Steve

Steve — Tue, 19 Sep 2017 17:16:35 +0000

In reply to Andy.

I’m not sure I understand your question… but if an S corp distributes only $7K to a shareholder, that’s the amount that would, worst case scenario, be vulnerable to reclassification in an IRS examination.

The other question is whether the S corp had paid reasonable compensation. If the S corp has already paid $90K in wages to shareholder-employee, that would probably often be reasonable.

By: Andy

Andy — Tue, 19 Sep 2017 00:27:05 +0000

What if one has regular w2 wages of $90k, and scorp distributions of $7k.
Does that $7k have to come from wages?

By: Steve

Steve — Tue, 27 Jun 2017 18:57:26 +0000

In reply to Lily.

I would reduce your distributions first. And mostly.

Remember that an employee would still expect to be paid even if the business was down, revenue-wise… So just because business is down doesn’t mean employees get paid less.

By: Lily

Lily — Sat, 24 Jun 2017 00:05:18 +0000

Hi Steve – If the S-corp has a low income year making say only 25% or less of it’s usual revenue, would you then just take a reduced salary ? I thought you could just forego the salary if revenues were extremely low. Thanks – very helpful site.