Comments on: Making Shareholder Distributions Look Reasonable to an IRS Agent

By: Robin

Robin — Sat, 16 Dec 2017 23:55:58 +0000

Hi Steve, I am reviewing this old post and have a question about smoothing S corp distributions. I read some articles by others saying that “even if you choose to leave some or all of the profits in the S Corp, taking nothing as distribution or salaries, you will still be required to pay tax on 100% of those profits.” Doesn’t this seem to contradicts to smoothing distributions?

By: Steve

Steve — Sat, 02 Dec 2017 21:36:53 +0000

In reply to David Young.

That works to save self-employment taxes. See this post:

http://evergreensmallbusiness.com/s-corporation-partnerships/

But your S corp is part of the controlled group of corporations that gets treated as a common employer. So the PLLC partnership retirement plan needs to be the one you use, too.

By: David Young

David Young — Sat, 02 Dec 2017 20:12:29 +0000

In reply to Steve.

Reviving an old thread … what if I hold my share of a PLLC through an S corp in which I am the sole owner and employee?

Can I set up a SEP for myself, or must I participate in the same retirement plan that the PLLC has for its employees?

By: Steve

Steve — Mon, 25 Jan 2016 19:13:24 +0000

In reply to Columbo. Yes.

By: Columbo

Columbo — Sat, 23 Jan 2016 07:03:39 +0000

In reply to Steve.

Steve,

By the FICA maximum, do you mean the $118K cutoff?

Thank you.

By: Steve

Steve — Mon, 01 Jun 2015 16:38:23 +0000

In reply to Heather.

Your S corp can set up a SEP… and then it can make contributions to your SEP and deduct on 1120S return as pension expenses.

Note that your SEP-IRA needs to operate within the rules. E.g., you can’t discriminate except in one of the “acceptable” ways such as based on age, years of service, coverage under a collective bargaining agreement, and so forth.

By: Heather

Heather — Fri, 29 May 2015 22:17:06 +0000

I didn’t think I could do a SEP if I’m a w-2 employee of my S Corp (single owner). Are you saying I can? Would the contribution amount be based on my W-2 income, or on my S Corp profit?

By: Steve

Steve — Fri, 15 May 2015 22:17:06 +0000

In reply to Kathy. I would say you dribble... though I will note that if you're paying the FICA max or close to it and especially if you're over the limit, you can distribute big dollar amounts without worrying about.

By: Kathy

Kathy — Fri, 15 May 2015 00:57:47 +0000

What if you’ve already made the mistake you discuss in Tip#1, and you have a pile of cash in the company. Are you better off dribbling it out in reasonable amounts year after year, or leaving it there until you wind up the business? Are there any issues when you eventually close the business with distributing a big pile of cash?