How do you pay out an S Corp distribution and does it go through QB Payroll? If the amount is $500, does the owner receive the full $500 or do taxes get withheld?

In an s-corp the owner is required to be on payroll. then  there is a board meeting with recorded minutes where the distribution is voted on and the date set (makes it easy as a one shareholder company).  This record is necessary in the event of a lawsuit, it shows proper procedure in that the company is being handled as a distinct entity in its own right.

then you create a liability account called distributions payable, and transfer the funds from retained earnings to the payable account.  On the date of payment write a check and use the payable account as the expense (reason) for the check.

A distribution lowers the shareholder total value, and as long as shareholder value does not go below zero, the distribution is tax free usually.  There are some exceptions so you really need to get with a tax cpa who understands s-corp.

Owner is on the payroll and draws a salary that is reasonable (or beyond), recorded meeting minutes and agreement on the distribution details and date are fine.

Really just looking for the details on setting it up within the Quickbooks Online interface. So it sounds like: 

• Go to Accounting tab
• Create new account, with a type of Other Current Liabilities (that was one built-in) and name it something like "Distributions Payable"
• Then click "+New" button and select "Transfer" - with the source being Retained Earnings and the destination account being the new Distributions Payable account 
• On the date you want to cut the check, select "+New" and "Check", enter in the relevant information and select "Distributions Payable" as the Category account for the check

If the above steps are correct, then to answer the original question, if the distribution was $500, the shareholder/owner would receive the full $500 via printed check, no taxes withheld. 

Owner is on the payroll and draws a salary that is reasonable (or beyond), recorded meeting minutes and agreement on the distribution details and date are fine.

Really just looking for the details on setting it up within the Quickbooks Online interface. So it sounds like: 

• Go to Accounting tab
• Create new account, with a type of Other Current Liabilities (that was one built-in) and name it something like "Distributions Payable"
• Then click "+New" button and select "Transfer" - with the source being Retained Earnings and the destination account being the new Distributions Payable account 
• On the date you want to cut the check, select "+New" and "Check", enter in the relevant information and select "Distributions Payable" as the Category account for the check

If the above steps are correct, then to answer the original question, if the distribution was $500, the shareholder/owner would receive the full $500 via printed check, no taxes withheld.