[Cleaningman23]

My cleaning company is elected as a S Corporation. My CPA said basically when I pay myself all I do is write myself a check.

Is it better to just pay myself a salary... with no deductions correct?

Those are taken out at the end of the year she told me..

[Fr_Chuck]

Your CPA should be advising you, but will you not have to pay state and federal taxes on your income

[jdbcpapa]

In a Sub-S Corporation an owner can take profit distributions which could be termed as withdrawals without deductions. However, these profit distributions should not be taken alone without any payroll especially if the owner of the Sub-S actually performs work for the corporation. The IRS deisres any active owner in a Sub-S to pay themselves a normal paycheck and withhold all required taxes. The trick is what is normal and the IRS does not give any guidelines.

In the near future Sub-S corporations without any officer compensation will be targeted for audit. As the tax laws will change due to excessive government deficits, any future profit distributions will be considered earned income subject to self employment tax like partnership earnings. However, as the law stands today limited profit distributions are not taxed until the end of the year on the owners 1040. So, by not paying payroll taxes through a regular payroll check any Sub-S owner is just postponing all of the tax balances owed until April 15th including all of the penalties too.

The best advice is to have a combination of salary minus payroll deductions and profit distribution. This way the owner gets credit for taxes paid in throughout the year and satisfies the IRS under Officer Compensation audits.

I have been a CPA in the State of Florida for 23 years and just received an MBA in April 2009 as well.

[Cleaningman23]

I talked to my Cpa...
She said at the end of the year. Since my business is still new.. we will average out a salary once my business starts making higher profits...
Does this sound right