"John Wilson" <jpw[at]creare.com> wrote:

- quote -

Sure is. I would venture to add that if you are asking that
question, there is a good chance that you prepared the Form
1120S incorrectly.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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John Wilson wrote:

- quote -

Yes, and yes.

On the bright side however, the corporation is not taxed on
it's profits.

ChEAr$,
Harlan Lunsford, EA n LA
Sun 20 Mar 2005

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John Wilson wrote:

- quote -

Yes.

If you didn't know that to start with, you shouldn't be
operating through an S corporation. You should consult a
competent professional to make sure you aren't missing
something else important. S corporations are not
do-it-yourself projects unless you have a strong income tax
background.

There is no tax consequence when you withdraw earnings from
the corporation, because you have already paid tax on that
income, or will do so on your next income tax return.

However, if you and/or your wife provide services for this
corporation, the corporation must pay you a reasonable
salary (subject to FICA and withholding). Your salary
reduces the amount of income that flows through to you on
the K-1.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"John Wilson" <jpw[at]creare.com> wrote

- quote -

Yes, you are taxed on the profits even if you didn't
distribute them from the business.

- quote -

Yes.

At some later date in time, that amount can be withdrawn
free of taxes, or it increases your cost basis and reduces
your gain (or increases your losses) when the business is
sold or closed.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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We have an S-corp and therefore TurboTax outputs a K-1 form
for both my wife and I (we are the only two shareholders).
The K-1 indicates a positive amount of money in the corp,
but we have not taken any of this amount in the form of
dividends. Do we still need to file the K-1 forms and pay
tax on this amount in our personal income tax filing? Is
this amount, even though we have not receieved it
personally, still treated as our personal income and taxed
at our standard rate?

Thanks for your help!

John Wilson

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