Discussion:SWEEET S Corp salary payroll compensation again
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Discussion Forum Index --> Tax Questions --> SWEEET S Corp salary payroll compensation again
| 5 March 2007 | |
| I just finished a 1120S where the two shareholders had ordinary income but also during the year, in addition to paying themselves W-2 wages, they gave themselves return of basis distributions which are non taxable. How nice!
Now, my question is, with all the talk about paying yourself a proper wage in addition to taking distributions, their distributions are about 2 1/4 times their W-2 wage. Should I advise to increase their W-2 wage? (Personally, I think their wages are too low....in other words, in order to hire a person to do what they are doing they would have to pay at least twice what they are paying themselves). I should add, One shareholder is "materially participating" one is not. How does W-2 salary work if you are not materially participating... maybe that shareholder shouldn't get a W-2? Thank you! | |
| 5 March 2007 | |
| MsTwizz - Why don't you search this forum for other discussions on this issue. There have been several great ones.
Good luck! | |
| March 5, 2007 | |
| Salary has nothing to do with ratios. www.salary.com or www.payscale.com. It has to do with reasonable salary for services provided. | |
| 5 March 2007 | |
| In addition, salary has to due with real economic concerns such as age of business, start up, economic climate, competition, profitability, risk and etc. | |
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