Reporting distributions.....(s-corp)

[Houseofpain]

I'm in the process of forming a S-corp (closed corp) & have the following concerns.

After paying myself a "fair" wage every month, do I need to file anything (throughout the year) if I pay myself corporate distributions on a regular basis? Or can I just keep corporate records of the distibutions, & just report it on the annual schedule K-1?

Is this the same at the state level for Arizona?


Thanks for the help......great forum!

[OldJack]

I like your name!

A corporation is required to maintain formal books and records whereas an individual is only required to have proof of deductions. Therefore, you need to use some program like Quickbooks or at least have an accountant prepare your books once a year.

As the only owner & employee you will be taking 2 types of checks. The checks may be taken weekly, monthly, yearly, or at any time in any amount you wish.

Check to you as employee: Wages paid require payroll withholding, payment, and reporting. Payroll withholding and payment of taxes are discussed in IRS Publication 15. http://www.irs.gov/pub/irs-pdf/p15.pdf Form 941 reconciles 3 months (calendar quarter) at a time and is file with the IRS reporting gross wages and the withholding. http://www.irs.gov/pub/irs-pdf/f941.pdf Payment of payroll tax withheld must be made on a timely basis or you will get stiff penalties. Dates of payment vary and depend upon the amount owed. This is all explained in the pub 15. You will also have State & Federal unemployment taxes to report and pay. State unemployment is usually quarterly and tax paid with the form. Federal tax is usually paid at any time the amount owed is more than $100 and form 940 is filed annually.

Check to you as owner: Cash distributions from an S-corp. As long as you are paying profits earned from the S-corp these payments are tax-free because at the end of the year you will have to pay tax on the total profits rather than the distributions. The distributions are reported on the annual 1120s tax return, page 3, Sch-K, Line 20 and the shareholders k-1.

There are other forms that you may have to file at year end. The wages require forms W2 and W3. Payments to others for service in excess of $600 requires form 1099 & 1096. Its all spelled out in pub 15.

Good luck

[Evan]

Is payment to state and federal unemployment necessary? I was looking for this information, but I received nothing specific.

[OldJack]

If you have timely paid all State unemployment your Federal unemployment is only .008 times the first $7,000 gross wages per employee. That is a max of $56 per employee. The federal tax is due at any time you owe more than $100. Form 940 is filed at year end to reconcile what you owe verses what you have paid or pay the balance due. State unemployment tax based upon the first $$ gross payroll is usually reported and paid quarterly. Yes.. owners salary is subject to these taxes but good luck trying to collect unemployment benefits. S-corp cash distributions are not subject to unemployment tax.

[Evan]

That's the problem, as an owner you can't collect RI unemployment because one question they'll ask is "Are you an officer of the corporation?" Once you answer yes, you're ineligible, most likely figuring that it's your fault that you aren't working.

[OldJack]

However, in some states if the corporation has liquidated the officer may be able to collect state unemployment benefits. You never get federal unemployment benefits as that is for government workers to get their benefits and they never even say thanks. How you like those apples?

[Eternum]

Originally Posted by OldJack

Form 940 is filed at year end to reconcile what you owe verses what you have paid or pay the balance due.

Should I still file 940 Form if a corporation did not have any employees and will not report any profits (first year in business)? From what I understand reading 940 Form instruction (under Who Must File), I should not. Am I right?

Thanks!

[OldJack]

If you received the 940 form from the IRS you should file it. If you did not receive a form from the government do not file one.

If you received the 940 form and do not expect to have employees in the future you can check the box "if you will not have to file returns in the future" show zero on the lines and you will not receive the form in future years. This form is sent to all new companies as a result of you getting a EIN with form SS4 and not that the IRS is expecting that your new company owes any tax. But, you have to tell them that by filing the form.