Any Chapter S Corp Owners In Here?

[Boca Vol]

My wife and I run a business that's a Chapter S Corp. Our business balance keeps growing every month for the last few years and I've been reading about how you can take a dividend (tax free) up to the stock basis (because you've already paid taxes to that amount as it carries over to your personal taxes).

My question is, how to pay yourself a dividend up to your tax basis and properly account for it?

Thanks for your help.

 

[Go aeiou]

I'm a retired CPA. What you are being told is true. Probably!
For Federal income tax You pay taxes on earnings, not dividends.

What state are you in? You might owe state taxes on the dividends (TN)
Did you participate in the business?
Who prepared your returns in the past? You probably should talk to a CPA. Also CPA or atty to verify that a sub s is more desirable than a LLC.

Your earnings might be paid at a lower rate than your personal rate in 2018 since the tax laws have changed.

 

[Boca Vol]

I'm a retired CPA. What you are being told is true. Probably!
For Federal income tax You pay taxes on earnings, not dividends.

What state are you in? You might owe state taxes on the dividends (TN)
Did you participate in the business?
Who prepared your returns in the past? You probably should talk to a CPA. Also CPA or atty to verify that a sub s is more desirable than a LLC.

Your earnings might be paid at a lower rate than your personal rate in 2018 since the tax laws have changed.

Thanks for your response.

We live in FL. Corp is registered here in FL. Been in business since 2012. My wife and I are 50/50 partners in the business. Our CPA is in NC.

This is just something I've been researching on my own and most of it makes sense. I just don't see the need to keep large balances in our business account when we really have very little expenses.

I guess I should just ask our CPA.

 

[DancingOutlaw]

I guess I should just ask our CPA.

Correct. S corps and partnerships offer the quickest ways to get yourself in a tax bind if you don’t know what you’re doing. Always check with your CPA before you do stuff involving basis or ownership, it can be tough to unring that bell without consequence.