Google Answers Logo
View Question
Q: S Corporation Tax Disbursement or Salary? ( No Answer,   7 Comments )
Subject: S Corporation Tax Disbursement or Salary?
Category: Business and Money > Small Businesses
Asked by: beckersolutions-ga
List Price: $10.00
Posted: 04 Sep 2006 21:46 PDT
Expires: 04 Oct 2006 21:46 PDT
Question ID: 762283
I have an S Corp I started this year to sell some software I Have
written among consulting services.  The funds going in are very small
and very un scheduled. There may even be a month where no money goes
in.  So I am left with the question of how do I pay myself?  Right now
the funds sit in my business account and I am tracking all income and
expenses for the business seperate, but at some point I will want to
take a draw on these funds personally for my effort.  How do I do
this?  Do I have to take a salary?  Do I do it as a disbursement /
distribution?  I'm the only shareholder with 100% of the shares in my
name.  I have no employees, just me.
There is no answer at this time.

Subject: Re: S Corporation Tax Disbursement or Salary?
From: cynthia-ga on 04 Sep 2006 22:00 PDT
At this point it is fairly uncomplicated, lack of structure is not
going to cause problems with so few transactions. What I would od is
write myself a company check. Be sure to save an appropriate amount
out for federal taxes because you will have to declare it on your
personal 1040. The business writes off the check to you as a business
expense, so anytime you receive money the tax obligation transfers
from the business to you personally. Eventually you will need to set
up proper payroll.
Subject: Re: S Corporation Tax Disbursement or Salary?
From: beckersolutions-ga on 05 Sep 2006 10:03 PDT
Will I need to generate a 1099 since I'd be paying myself as a
contractor or would the check I write to msyelf be classified as a
distribution?  Also, can you point me to a good small business tax
resource?  I have no idea about all these taxes and don't want to
spend my few hard earned dollars paying $500 to some accountant to do
my taxes.  Is there a tax program you recommend?  Thank you.
Subject: Re: S Corporation Tax Disbursement or Salary?
From: cynthia-ga on 05 Sep 2006 10:47 PDT
I always recommend an accountant, especially with an S-Corp. Yes, do a
1099 for now. Technically, you should be on payroll and be withholding
state and federal payroll taxes. A CPA will need to straighten it out
at some future point, buyt as I said, with so few transactions, it
should not pose any problems.
Subject: Re: S Corporation Tax Disbursement or Salary?
From: beckersolutions-ga on 05 Sep 2006 21:19 PDT
Thank you for the feedback.  Now what do I do? This shows no "answer"
here but I'd like to say that my question has been answered, how do I
do that?
Subject: Re: S Corporation Tax Disbursement or Salary?
From: lgcoleman-ga on 06 Sep 2006 09:54 PDT
Sorry, but you should NOT take a 1099 from your s-corp. As a corporate
officer you are by definition an employee. You have two options for
taking money out. You can give your self a paycheck, which need not be
on a regular basis. Or you can take a distribution which will reduce
your basis in the S-Corp (btw, kudos for selecting S-Corp it will save
you some hassles since it sounds like you also do consulting. You did
file Form 2553 to make the S-Corp election, right?)

I would recommend you take a salary. It's a pain the butt but it is
the correct way to do things. If you make a distribution be sure it is
not greater than your basis in the corporation. Since you just started
your company your basis is any money you put in to the business
(usually startup money) minus any money you take out (that is not
payroll) plus or minus any gain or loss for the year. The ending
balance of your basis this year, 2006, become the beginning balance
for your basis in 2007.

See IRS Publication 542, Corporations: for more information
Subject: Re: S Corporation Tax Disbursement or Salary?
From: myoarin-ga on 06 Sep 2006 10:18 PDT
It should be pointed out that nothing posted here is a substitute for
informed professional advice, as explained in the disclaimer below.
I do not wish to suggest that any comments are incorrect.
Subject: Re: S Corporation Tax Disbursement or Salary?
From: cynthia-ga on 06 Sep 2006 11:09 PDT
I agree, a 1099 is not the "correct" thing to do, but as I said, there
are so few transactions that a CPA can straighten it out easily. As I
said technically you are an employee and must withhold taxes and such,
but I've been in your situation with a C-Corp and you won't cause any
serious problems by writing yourself a check with or without the 1099.

No one has posted an "official answer" --that's why the answer box is
still empty. I'll post there later today, since I think you are saying
I answered your question. --I'm in a hurry right now..

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  

Google Home - Answers FAQ - Terms of Service - Privacy Policy