Corporation S CorpWages wait for the acceptance

Reasonable wages are a rule for shareholder employees of an S company. They are not a rule you apply to a company that only hopes to be one. If we set up S wages before the acceptance exists, the payroll file and the tax status tell different stories. Cleaning that up costs more than waiting a month.

The gate is the IRS acceptance, read beside the certificate so we know which company it belongs to. A dropdown that says S is not the gate. A prior organizer that says S is not the gate. The paper is the gate.

Once the gate opens, the conversation is ordinary. Who works in the company. What the work is. What a payroll provider needs in order to calculate a wage. Distributions do not start until that wage is in place for the people the rule covers.

Reasonable is about the work performed, not about a target for distributions. An owner who runs the day should not take a token wage and a large distribution and call the split a strategy. We will say that plainly. We will not publish a dollar target, because a stranger's business is not your business.

The qualified business income rules can limit the favored slice of passthrough income when wages are thin. We describe that as a reason to take the wage question seriously. We do not quote a year by year dollar cliff on this page. Those cliffs move, and a public number would rot.

Basis still matters. A distribution that exceeds basis is a different problem from a thin wage. We track both. We do not collapse them into one pep talk about taking money out.

Payroll setup on this site means helping you aim the provider you already run. Categories, a wage that matches the work, and a books-side account that mirrors the provider's reports. The provider calculates, files payroll returns, and pays people. We do not run payday, and we do not want the login that would let us.

If you have no provider, we will say so. Choosing one is your decision. We can tell you what the books will need to mirror. We will not stand up a payroll service inside this practice.

Officer wages on a C corporation are a related, older conversation. They do not wait on an S acceptance because the company is already a C. They still belong on the provider. This page is about the wait that applies when someone is reaching for S.

We will not gross up a distribution and call it a wage after the year has ended, as a cosmetic fix, without looking at what the provider can still file. Sometimes a correction is available. Sometimes it is not. The fake version is a journal entry with no payroll return behind it. We do not make that entry.

We will not promise that a late S election under Revenue Procedure 2013-30 will bless last year's wages. The procedure is about the election. Wages have their own facts. We keep the two repairs in separate sentences.

Bring the acceptance or tell us it is missing. Wage talk starts on the far side of that sentence.

A paycheck stub on the kitchen table has to match work somebody actually did. A picture of a meal would not fool the person who did the work, and a round number in a journal will not fool the return. A wage has to be that solid before a distribution gets to follow it. Acceptance comes first. The payroll service already paying the company keeps payday.