S Corp Shareholders Distribution

[Succ3d]

What is the name of your state (only U.S. law)? California

I have an S Corp and in 2012 I paid myself shareholder distributions in the amount of $20,000.00 as opposed to paying myself salary. I realized now that I should have paid myself salary otherwise it could raise a red flag with the IRS. My net income is $39,000.00. What is the best way to handle this situation? Reclassify all or some of the shareholder contributions as payroll? Leave it like it is? Thank you in advance for your help and your responses.

 

[tranquility]

What is the name of your state (only U.S. law)? California

I have an S Corp and in 2012 I paid myself shareholder distributions in the amount of $20,000.00 as opposed to paying myself salary. I realized now that I should have paid myself salary otherwise it could raise a red flag with the IRS. My net income is $39,000.00. What is the best way to handle this situation? Reclassify all or some of the shareholder contributions as payroll? Leave it like it is? Thank you in advance for your help and your responses.

I would amend. This is the first thing looked at in audit.

 

[LdiJ]

What is the name of your state (only U.S. law)? California

I have an S Corp and in 2012 I paid myself shareholder distributions in the amount of $20,000.00 as opposed to paying myself salary. I realized now that I should have paid myself salary otherwise it could raise a red flag with the IRS. My net income is $39,000.00. What is the best way to handle this situation? Reclassify all or some of the shareholder contributions as payroll? Leave it like it is? Thank you in advance for your help and your responses.

Was 2012 the first year that your S-corp operated? I agree with Tranq that its a hot topic, but my experience is that the IRS generally won't harass you on it the first year that the corp is in operation. However, you absolutely need to get that changed for 2013.