If you own an S Corp, you may know that there are benefits to electing an S corporation.
Did you also know that the IRS generally requires you to pay the owner(s) through payroll before drawing money from the business?
This is because of one of the benefits of S Corp, tax savings.
You get to save taxes, but IRS also makes sure that you pay at least a reasonable amount of taxes – through paying yourself payroll (which comes with payroll taxes 🙂 ).
I have seen people asking how much owners should be paying themselves.
Per IRS, “S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee. “
(Source: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues#:~:text=The%20key%20to%20establishing%20reasonable,of%20non%2Dshareholder%20employees%20or)
So… the question is, what is considered “reasonable?”
This is a question you want to be asking your tax professional.
A reasonable amount is different from business to business, and the tax professional can help guide you on how much you should be paying yourself as an owner, through payroll.
