I have started the SCorp in 2013 and i did not run any payroll for my self. Is it mandatory to run the payroll? i work at another comp on 1099, so i get at w2 from the employer and SSN and Medicare are paid for it.

in general yes; however, strictly speaking, it depends; The irs has rules about taxable wages of a reasonable amount for an S corp shareholder who contributes personal services to the business. Some of the factors used to determine if these wages are reasonable include the shareholder's duties and wages paid for similar services at comparable businesses. If most of an S corp's income is derived from services provided by shareholders, the IRS requires allocating most payment to shareholders as wages rather than tax-free distributions.So u8nless your S corp takes lossess, you as a SH/EE , you need to issue yourself W2 and report it on 1040 evenif you receive 1099 from another biz.So, When S corp profit is taxed at the shareholder level, only regular income tax is paid. Shareholders are not assessed self-employment tax, which covers contributions to Social Security and Medicare. Unlike unincorporated proprietors, business profit for an S corp is not considered self-employment income. However, S corp shareholders who provide more than minor services to the business must receive payment as wages, instead of all as tax-free distributions. These wages do incur employment taxes for Social Security and Medicare.and your s corp needs to submit 941/state forms to irs/state quarterly basis

Each Share holder is getting 20k Profits... and if i run the w2, i guess we will not have any profits... the share holders work is very minimal... the SCrop is a consulting business... the work over here is like raising the invoice and getting the money, since the contract is done only once.

I know what you mean; however, UNLES the biz takes losses, you need to W2.The benefit of being an s-corp is being able to pay yourself a salary (one that is reasonable and justifiable). This allows you to avoid self employment tax on the amount of your income that exceeds the reasonable salary for your position. For example, if your making 40k income, but a reasonable salary is 20k, you take 20k of salary upon which you pay SECA tax, the other 20k is a distribution which is not subject to self employment tax. Massive tax savings.

You need to create a W-2 form by filling out form W-2 and giving it to the employees/shareholders by the end of January every year, and having the biz file the summary report W-3 with the IRS.