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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121144  
Subject: Re: Leaving money in S Cospr at end of year Date: 5/25/2010 1:26 PM
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Just leave the cash in the corporation's bank account and pay the expense next year (or whenever it needs to be paid). The amount you withdraw from an S corporation is completely unrelated to how much tax you pay each year.

You pay tax on the corporation's net income whether it is distributed to you or not. So leave the money in, take the money out, it makes no difference.

Now if the expenses next year exceed the income, the S Corp would show a loss. Assuming you have sufficient basis in the corp, you can deduct that loss personally. And if that loss is big enough, it might create a Net Operating Loss (NOL) on your personal return. An NOL can be carried back for at least two years (and sometimes as much as 5 depending on the year and the whims of Congress). That would reduce your income in some earlier year and get you a refund of some taxes paid in that earlier year.

I'd suggest you sit down with your tax pro to work out the best solution for your situation. I think you mentioned in your first post that you had a professional prepare your corp return. Get their input - they know your situation. And as a tax pro, I like it when clients actually ask me to help them plan out their taxes. The end result is usually much better than trying to go it on their own.

--Peter
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