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Author: spongebrain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Mandatory W2 from my S-Corp ? Date: 9/6/2000 10:03 AM
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This past year, I started a one man S-corp that has billed approx 200k in revenues this year. I have not drawn a salary from this corp since I have very little living expenses and have lived off previous savings. I will not need to touch any cash accumulated in the corp for several years.

My accountant has suggested that this can be viewed as evading paying self-employement tax, and that we should W2 myself, and draw a salary. This would incur substantial self-employement and unemployment taxes (approx $15k) He also has stated that there is no concrete rule that he can find saying if mandatory salary levels for an S-Corp exist. This seems hazy and gray, at best.

Since I do not currently need the salary, I'd perfer leave it in the corporations account. There is also a business case for leaving it in the corporation. I plan to take on additional employees in the future, and would need a substantial cash base buffer to do this (salaries, benefits, etc).

On the other hand, drawing a W2 salary could allow me to participate in a SEP, whose tax benefits (a $22k deduction) could offset the costs of W2'ing myself.

Any thoughts?
Thanks!
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