?--------------->>>>> you, as an s Corporate officer ,do not get draws. you need to be on payroll, as employee.your income reported on your w2 is reported on 1040 line 7 as regular wage/salary and the income is subject to fica taxes to the irs. S corp shareholders generally prefer dividend distributions of their S cor?s profit over compensation payments from the S corp because the compensation payments are subject to payroll taxes and dividend distributions are not. To prevent S corp and their shareholders from avoiding payroll taxes by maximizing distributions and minimizing compensation payments, the IRS requires S corps to pay shareholders who provide substantial services reasonable compensation reported om w2 and is reported on f1040 line 7. S corps generally do not make dividend distributions. S corpd generally make non-dividenddistributions, which are tax-free, provided the distribution does not exceed the shareholder's stock basis. If the distribution exceeds the shareholder's stock basis, the excess amount is taxable as a long-term capital gain.
S corp distributions are not subject to soc sec taxes. |