Skip to main content
A
ac-control
December 30, 2021
Question

Owners of an S-Corp...  By IRS rules they must take a salary, is that correct?

  • December 30, 2021
  • 1 reply
  • 0 views
Two owners of an S-Corp.  By IRS rules they must take a salary, is that correct?   In the IRS tax form 1120S, the owner's salary is not considered as part of the expenses/losses, is that correct? If that is correct, then how should the owner's W-2 salary be recorded on the books?  As an expense?

1 reply

Rainflurry
Rainflurry
December 30, 2021

Owners must take a "reasonable salary" if they are shareholder-employees.  If they are not employees, they are not required to take a salary.  The owner's salary is definitely considered an expense to the corporation and is deducted (separately from employee salaries and wages) on line 7 of Form 1120-S.  However, that expense flows through to the owner on their W-2. So, it gets added to their personal income tax return along with their allocable share of business income (loss) reported on their K-1.  Find a good CPA.

    Terms & ConditionsAccessibility statement