Back in early 2002 I formed my own S Corp in anticipation of starting my own consulting business. Well this never happened as quickly as I anticipated and I sort of “let it go”. Then in November I got my first contract and received a total of 10k in payments for work that I did and I had it billed to my S Corp because it seemed logical at the time. Being tight on cash I wrote myself a check from my S Corp account and deposited it into my personal account (the entire 10k) to pay off some bills! oops…I know that was bad. What is the best way to handle this for my personal taxes? do I need to claim the 10k as personal income and how does this affect my S Corp tax filing? any help is much appreciated…thanks!
This is the sort of question that you really should see an accountant about, rather than asking on a message board. The tax implications will vary based on the other tax events you had going on in the tax year.
That being said, you will owe income tax on the income coming through the S corp. The idea of an S corp is that it is a pass through enitiy, so it will be treated more-or-less like you earned the money as an independent contractor. In addition to taxation as ordinary income, there is self-employment or social security tax to think about. Whether you will be liable for interest or penalties will depend on what other withholding or estimated tax payments you made throughout the year.
In short, get thee to an accountant, quick.
You might check out this site for information about filing S Corp tax returns. Income from S Corps are reported on Schedule E on your personal return. It would also probably be a good idea to follow Billdo’s advise and consult an accountant.