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Discussion Forum Index --> Tax Questions --> Profit Distribution
Rwilson (talk|edits) said:
| 26 December 2007
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| One of the partners in our firm is currently on sabbatical in Argentina working as a missionary and therefore hasn't received any employee wages in 2007. Since we are an S-Corp he will still receive his portion of any profit distribution for the year. What is the best way for him to pay taxes on the profit he'll receive for 2007? He used to pay quarterly taxes on what he estimated his tax liability would be, but this year he's paid nothing. A friend of mine suggested the company pay his profit through a 1099 rather than a K-1 and classify him as an investor rather than an employee. Will he get a tax penalty if he just makes a lump sum payment before the end of the year for the amount we forecast will be on his K-1?
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LSC CPA (talk|edits) said:
| 26 December 2007
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| I am assuming he is a shareholder of the firm. In that case he must receive a K-1. There's no such thing as issuing a 1099 to an owner of an S-corp in lieu of a K-1. Even investors who are not employees get K-1's if it is an S-corp. And he has no options to avoid tax on his share of the corp's income. He should determine what he should pay in by Jan. 15 in order to avoid an underpayment of estimated tax penalty, assuming that he will owe tax and at least pay that by Jan. 15. What he needs to pay in is based on what his income will be for the year.
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DZCPA (talk|edits) said:
| 27 December 2007
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| Call your tax professional and have he/she calculate the potential taxes due and suggest how much to pay by year end (for State) and Jan 15th for Federal. Taxes are to be paid with form 1040ES (Federal).
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