Salary versus Dividends

[Tonystar1]

What is the name of your state? Nevada.

My partner and I recently formed an S-corp in Nevada. We will be working toward a revenue of 20K per month. Our question is, should we take a monthly salary draw against our bank account, or draw our pay as quarterly dividends? When it comes to a small corporation such as ours, what does the IRS consider acceptable, and what would they frown upon?

Thank you,

Tony

 

[Snipes5]

Take it as salary, subject to self-employment taxes. If you try to take it as dividends (which are not technically subject to self-employment taxes), the IRS will rule it salary anyway, since taking it as dividends would be seen as an attempt to avoid paying proper taxes.

Snipes