On Jan 29, 2:43*pm, kbutterly <kbutte...[at]yahoo.com> wrote:
- quote -


Kathryn,

Yes, as Harlan suggests, you have missed something big.

The S corporation must pay you a reasonable salary for the work you do
on its behalf. Your salary is subject to FICA and individual income
tax (federal and state, if applicable) withholding, and to state
unemployment insurance tax and FUTA. If the corporation bills its
client the same hourly rate for your services that you, as an
individual, bill your other clients, it may be hard to argue that the
entire pre-salary net income of the corporation isn't a reasonable
salary for your services.

You need professional help to get this S corporation set up and
running properly. S corporations are not do-it-yourself operations;
the rules are complicated and it is easy to make expensive mistakes.
See a tax specialist as soon as possible.

Katie in San Diego (another Kathryn <G> )

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On Jan 29, 9:40*pm, Harlan Lunsford <hnslunsf...[at]bellsouth.net> wrote:
- quote -

head. You need professional help OR severals years of study in
taxation.

Gene E. Utterback, EA, RFC, ABA

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kastnna wrote:
- quote -

out a salary, but must do so. And a reasonable salary at that; not
just a token salary. And of course payroll taxes then come into play
with attendant state and federal unemployment taxes.

ChEAr$,
Harlan Lunsford, EA n LA

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Food for thought:

A distribution to a shareholder does not count as earned income, IIRC.
As a result, you can't tuck that money away into a 401k, SEP, Roth,
etc...

You may want to consider paying out some of that as salary and some as
shareholder dividends.

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Good evening all,

I have a set up an S corporation for my computer consulting business.
I have three clients and one required that I have a corporation prior
to hiring me. The other two clients hired me through agencies, which
employ me as an individual.

Am I correct in thinking that if I made $50000 from that one client,
that on my 1120S, I can show $50000 in income and then $50000 in
distribution to shareholders (i am the only shareholder) and that's
pretty much it.

I will then show the $50000 on my 1040 and go on from there.

does that sound right, or am I missing something big.

Thanks,
Kathryn

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >