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Level 1

S-corp contribution and distribution help

I really appreciate help for my s-corp QuickBooks.

1) I paid around $80k from my own account as startup expenses,I put it as owner contribution

2) I withdrew $140k so far from that account after paying “reasonable” salary.

3) I am paying Obama care insurance premiums through company credit card

 

questions

1) how to balance out negative amount of $80 vs $140 ? Do I have to keep in equity account or distribution account as I am planning to withdraw more so want to make sure how to record.

2) can I pay dividend insured taking as distribution of those amounts?

3) how to handle health insurance premiums and HSA payment through s-corp

 

6 Comments
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Community Champion

S-corp contribution and distribution help

If you have an Owner Contribution Acct, did your Accountant have you set up another Equity account called Owner Draw Acct?  That is where you show the money you pay yourself.  (Other than the salary which I'm assuming you're doing for SS, etc.)

 

On the Insurance, what exactly is being paid on the company CC?  Just the companies portion or both your portion and the companies?  And do you deduct anything from your Paycheck for the insurance or is it just a separate item?  If your paycheck is involved then a question you need to get your Accountant involved in since it may need to be set up as a Liability and then payment.  Especially when you get to the year end.....   Really should check with him/her on this anyway.

 

In the simplest of setups, the companies portion is an Expense.  So the payment just goes against a Health Insurance Expense Acct.  But if the card is also paying your portion, then you need to split off that part of the payment against the Owner's Draw account since it's not a company expense.  (Again, in simplest of terms.)

 

Highlighted
Level 15

S-corp contribution and distribution help


@asp7980

 


You need to sit down with a tax accountant soon as you can

S-corp does not have equity draw and investment accounts, there are shareholder accounts that can not be used the same way as the equity draw and investment are in non corporations

Distributions are normally tax free, but if they exceed your basis, shareholder value, then they can be taxed as normal income.  There are a lot of if-this-then-that in making that determination, so its not cut and dried.

Again get with a local tax accountant.

Highlighted
Level 15

S-corp contribution and distribution help

There is no Owner. You are the shareholder of the Corporation, which is its own entity.

 

"3) I am paying Obama care insurance premiums through company credit card"

That is Taxable to you and has to run through Payroll.

 

"1) how to balance out negative amount of $80 vs $140 ?"

 

You overlooked Equity from Operations. You need to run the Balance Sheet report to see All Equity. Distributions are removing asset, so equity goes Down. Once the 1120S is prepared and all year end entries are made, the total in Distribution is taken to zero, offset into Real Equity, so that Distributions start over. If there is only the one shareholder, I just use Retained Earnings for everything, since the program also used it for the Net Income from the prior year end.

 

"Do I have to keep in equity account or distribution account as I am planning to withdraw more so want to make sure how to record."

 

Another reason to work with your CPA, is that your understanding of Reasonable Salary might not match what the IRS computes; when there is that much More that you can take, you might have set your salary too low. I have a website for reference that I recommend: ww.rcreports.com where they have great explanations including IRS lawsuit reviews where the IRS lost, and where the Taxpayer Lost.

 

"2) can I pay dividend insured taking as distribution of those amounts?"

 

Dividend = C Corp.

 

Distributions are not really Tax Free; they are considered Taking profits as a sort of Sequence of events: Distributions in the year are considered first as from this year's operation, which is reported on the tax form whether you take distribution or not, for this pass through entity. If you exceed that, then you took from the Prior year as Retained earnings. If you exceed this, you are considered to have removed your own Basis. If you take even more than all of that, this would be Taxable for you, such as, taking a business loan and then Taking the funds personally.

 

Distributions should never be Routine, as for instance, matching to pay dates. I recommend not more often than Quarterly.

 

"3) how to handle health insurance premiums and HSA payment through s-corp"

 

HSA as well as Premiums?

The Health Premium a Taxable Company Contribution, and through QB Payroll on the Desktop, you would set up and use the Payroll Item named for "S Corp Pd Med Premium" as it applies to a 2% or more shareholder. The HSA is a Fringe Benefit.

 

If you did this in 2018 as Bills or credit Card and Expense, and never ran it through payroll, your W2 and all payroll reporting are going to need to be amended. It's time to find a CPA to get this all corrected.

Highlighted
Level 8

S-corp contribution and distribution help

 

 


@asp7980 wrote:

I really appreciate help for my s-corp QuickBooks.

1) I paid around $80k from my own account as startup expenses,I put it as owner contribution

Equity Account: Shareholder Investment - Credit this account and Debit Cash Bank account  

 

2) I withdrew $140k so far from that account after paying “reasonable” salary.

Equity Account: Shareholder Distribution - Debit this account and Credit Cash Bank account

 

3) I am paying Obama care insurance premiums through company credit card

For S Corp > 2% Shareholder, these premiums can be paid using biz or personal funds.

If paid by biz, must be added to payroll as imputed income, taxed and deducted from Net pay.

If paid by personal funds, reimburse yourself but be sure to tax as > 2% SH health insurance.

 

 

questions

1) how to balance out negative amount of $80 vs $140 ? Do I have to keep in equity account or distribution account as I am planning to withdraw more so want to make sure how to record.

You cannot take out more money than you put into company or you have negative equity.

Hopefully you earned profit such that Retained Earnings + Investments > Distributions 

 

2) can I pay dividend insured taking as distribution of those amounts?

S-Corp has no Dividends, has only Distributions, see attached

 

3) how to handle health insurance premiums and HSA payment through s-corp

Answered above and see attached.  HSA can be company-paid fringe benefit

 


Definitely should get some accounting help, especially if you have negative equity already.

Highlighted
Level 8

S-corp contribution and distribution help

@qbteachmt 

Agree, sounds like maybe taking too little as reasonable salary to have that much in Distributions. 

Good chance may have to pay more of that as salary with full payroll and income taxes vs. Distributions.

Highlighted
Level 8

S-corp contribution and distribution help

If you are an S Corporation, you can pay your entire health insurance premium as business expense (assuming you are a >2% Shareholder).  You just are required to add total as taxable income on W-2.

 

If premium was paid with personal funds, then reimburse yourself via payroll to get that amount taxed.

If premium was paid with business funds, then must add to your W-2 as imputed income to be taxed.

 

I'm not a tax person, but I'm an S Corp and have done this for the last decade for myself and all clients.

My Tax lady is a former IRS auditor who I trust and i have read the tax law on this one myself for years!

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