hnsl wrote:
- quote -

I don't see a carpenter having much invested in assets - a
few thousands, perhaps, but not enough to dissuade an IRS
auditor. The OP said he had no employees. Again, the OP
seems to describe a situation in which virtually all the
profits are generated by his personal labor. If he has
"goodwill," he generated that with his personal labor, too.

I'm not saying all profits risk being reclassified as wages,
just distributions of profits in excess of wages.

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Bill Brown wrote:
- quote -

On the contrary, Bill. There are other factors which
militate against everything being classified as wages, e.g.
goodwill, trade name, investment in assets.

In short, everything depends on what IRS calls "F&C" - facts
and circumstances. And no two businesses are alike.

ChEAr$,
Harlan

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John/Charleston wrote:

- quote -

<<SNIP>
- quote -

Uh oh. I'd be willing to bet that upon audit the IRS would
assert that any withdrawals beyond wages should be
reclassified as wages. All the S-corp profits appear to be
generated by your personal efforts as a "glorified
carpenter."

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I am sole owner and sole employee of an s-corp. I pay
myself a wage on a quarterly basis and the corp has earnings
above and beyond that wage that I usually withdraw (minus a
minimal amt for operating expenses) at the first of each
year.

This year I'm in need of money above the wages my corp pays
me. I'd rather not increase my wage as I'd then have to
pay SS taxes on that money but am I allowed to just withdraw
excess money at any time from my s-corp? Or do I need to
wait til the end of the year?

Also, how is the "fair compensation" for my work decided?
I am a building contractor, state licensed, but I'm
basically a glorified carpenter who works alone and
sometimes does "handyman" level work. I don't pay myself
much wages-wise but how do I know if I'm paying myself
enough to keep out of trouble with the IRS?

Thanks,
John

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