Business Owner Pays Tax On S-Corporation Distribution

What if we took out the excess distributions but we used that cash to pay for deductions for the buisness??

So how would that owner take out excess distribution if the net profit was only that much?

Boris, i filed as a single member LLC and was audited and the IRS only asked for payroll documentation. Now i qualify as an SCorp entitity and pay myself a resaonable salary. Now how much owner distribution can i take out. So i would have to file a K1?? This sounds so good to be true

Oh Snap Boris!

If the owner has been reporting loans that are taken out every year, are all of those years added up which can show the access of the owner's draws? In other words, would the IRS count all those years? Thanks

That was a great video, thank you for putting that together.

Love the idea of Loan to Shareholder! Good tax strategy.

Genius

Valid points, Boris, but what you're describing as a "common problem" is something that the market dictates. Just to let you know, I don't agree with this and don't run my practice that way but am simply pointing out the elephant in the room. As you know, depending on the facts, basis may not be relevant to the tax return for a given year. Historically most preparers would not do the additional work to track basis because they would try to keep costs minimal. Quoting a higher price to reconstruct basis often means that the business owner will go elsewhere for a price they deem right. One can't stay in business very long that way. The truth is that any competent return preparer with even cursory training in subchapter K should be able to construct basis but is the client willing to pay for the additional hours of labor? I suspect that the reason why a "tax strategist," I believe you called it, would reconstruct basis is because the client probably values such a professional more than his or her preparer and will agree to different billing/working terms.

so don't take more than you profited that year?

Boris, you rock!
Thanks for all of your videos.

Thanks for the awesome tips Boris!

If I borrow 1M from sba loan, does that 1M consider business equity?

Why don't you write $312,000. Instead you wrote $312?

What’s the tax liability of a s-Corp that posts no profits or even losses in a give tax year? Is there a minimum distribution and salary amount that minimizes tax liability of S-Corp?

Is there a good tutorial on how to set up your books (assuming cash accounting and books set up to match tax rather than GAAP) to automatically account for S-corporation shareholder basis as profits, expenses, distributions, and possibly even losses, hit the books. Even better if the chart of accounts makes figuring M1/M2 easy. Accounting articles talk about equity accounts but don't really say how they interact, in practice, with income and expense transactions.

Wouldn't the Capital Gains tax be less than the tax on the same amount of money as a distribution, effectively lowering the tax on the income the dentist earned, or is it not considered a long-term Capital Gain at 20%?

Does deferred income left in savings count as equity in the business?

Good

Great information! I reached out to your office for a consultation. I’m a small business electrical contractor. My question is what is considered business equity and what’s considered owner’s equity. Basically at start of my business I invested say 50k to start a business which includes tools, a work van etc. Now to pay myself back the owners invest that does deduct against “business equity” or is that deducting from owner’s investment. The way I see it is I’d want all my money back that invested into the business that were say hard heard W2 wages that were already taxed

How do you take a distribution is excess unless its on credit? Wouldn't your total bank account amount limit your distribution to that 132k?

Hey Boris, as a first year s corp can I put my salary on 1099-nec and put the rest as distribution? Because I didn’t take any payroll.

😮😮😮😮 ok I need to rewatch this one!!!

Thanks Boris for your video. Very helpful. Can I avail of your services? I have an S-Corp and I live in Southern California. My P&L showed a profit of 48K but this plus 3K of nondeductible meals was reported on my K1. As you know K1 is treated as my income and therefore I have to pay taxes on my personal return. I really would appreciate if I can consult with you.

Hey Boris, I’ve got a small scorp about to start making $100k per year rev. At $20k-$40k profit. I’m looking to bring on investors for working capital to scale, what tax tips do you have?

Your videos are awesome!! Thank you so much. What will happen again next year to Sam if he has another excess in distributions, Can he requests another loan? So Boris, in my case if a have a reasonable salary of $80,000 and my total AGI for the company was 300K. But I took $150,000 in excess distributions, Am I going to pay 35% on taxes on this excess, right? Is it worth it to do a loan agreement for this? Thank you so much for your help😀 I'm a S Corp, just one member and a single tax payer.

Can you show us how you reconstructed the shareholders basis from prior year returns in a similar situation as well trying to figure out what’s the best way to attack it