I have a tiny S Corp. I have not taken any salary not have I withdrawn any money. The S corp is profitable. My husband and I are the only shareholders.
Do I have to file the quarterly 1040 ES? and pay taxes at this time?
If not 1040 ES, what form should I use?
Please let me know.
Thank you,
Rita
Why not pay yourself a salary and have federal income tax withheld?
If you don't take a salary you will report all the profits as a ordinary income. The IRS frowns upon this because ordinary income is subject only to federal tax, not social security plus base medicare tax. They require you to pay yourself a salary reasonable to the profession, and you can take the remainder as ordinary income.
There was even a rule that a one or two person S Corp should have all of its profits taxed as employment income, but I'm not sure what came of that rule.
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