The Danger of Distributions Replacing Wages In S Corps

For S-Corp shareholders, the option to take a distribution instead of payroll might sound appealing. Why? This route seems like a sure way to avoid paying additional taxes related to payroll.

However, tax law requires that S-Corp shareholders take (and pay related payroll taxes on) wages equal to reasonable com-

pensation for the role played by the individual shareholder. Otherwise, red flags are raised and your risk of audit increases.

What??

Check out this video to learn more. And if you have any questions or concerns about your exposure to tax liabilities for your S-Corp, please schedule a complimentary consultation to review your situation.

The information presented is of a general nature and should not be acted upon without further details and/or professional guidance. For assistance in identifying and utilizing all the tax deductions to which you are entitled, please contact us, your CPA or tax preparer.