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How to Handle Salary for a Single Member LLC with S-corp Election

I have an single member LLC in Florida that took the S-corp election.  I believe I understand how to take a reasonable salary which must go through normal payroll processing including withholding for federal taxes and state taxes, unemployment, and self employment taxes (both employee and employer Social Security + Medicare).  And then any remaining profits get taxed at the end of the year through my personal return via K-1 (but these are not subject to the self employment taxes).   These remaining profits can stay in the business or be taken out at any time as they have been taxed. 
  
It seems possible that on a year with less income than expected, that your salary could exhaust all of the current year profits and thus pull in prior year profits that have already been taxed, exposing them to double taxation via payroll processing.  Is there something in place in QB, TurboTax, or my payroll processing system (using Intuit) that prevents this?  Or is it more of a matter of adjusting the salary as needed to prevent this from happening?

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Best answer 03-01-2019

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Re: How to Handle Salary for a Single Member LLC with S-corp Election

There is no build in mechanism within QuickBooks.  You would have to adjust your salary accordingly.  Any losses from your K1 can reduce other taxable income on your 1040 provided your have the basis to take the loss (i.e. previous years' gain as retained earnings less any distributions taken).  If you do not have the basis, the loss carries forward until you have sufficient basis to take the loss in a future year.

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Established Community Backer *

Re: How to Handle Salary for a Single Member LLC with S-corp Election

There is no build in mechanism within QuickBooks.  You would have to adjust your salary accordingly.  Any losses from your K1 can reduce other taxable income on your 1040 provided your have the basis to take the loss (i.e. previous years' gain as retained earnings less any distributions taken).  If you do not have the basis, the loss carries forward until you have sufficient basis to take the loss in a future year.