Hi, Matt.This is not professional opinion, so take with a grain of salt. OTOH, I am also a consultant, and own a C-corp, of which I'm the only employee. (I chose C on purpose, for other reasons, so I don't have direct experience with S-corp distributions.)Yes, you can loan money back and forth between yourself and your corporation. I've done this--mostly from me to the corporation, when it was new. I didn't bother with loan documents (why sign a page as both creditor and borrower?), but I did mark the checks, and set up a separate account in QuickBooks to track it. And I did pay the loans off. I think this is a sufficient paper trail to make it clear that they were loans.However, this probably won't help you with your situation. Your corporation would have to report Loan to Owner of $3400 as an asset, and would show a profit. And owe taxes.Aside from that, you have to be somewhat careful about S-corp distributions. Since the corporation generated income by employing you as a consultant, it has to pay you a "reasonable" salary. What's reasonable? Something similar to what you would have been paid by some other corporation to do a similar amount of work. I don't know how much that is, but you should have an idea. If you don't pay a reasonable salary, the IRS can reclassify the distribution, or part of it, as salary.If you made a $3400 salary payment in 1998, and didn't withhold Federal and State taxes, and FICA and Medicare, you're late now, and owe penalties. Then there's Federal and State Unemployment, too. Ouch.When I set up my corporation, I had a CPA take me through all the filings. It wasn't cheap, but I've got a handle on it now. Fortunately, there are tax benefits, too.Good luck.Michael
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