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It seems a requirement of a single-member S-Corp is to pay one's self a "salary" - suggesting a weekly or bi-weekly payment that amounts to a pre-determined figure at year's end - but in a single person company, business can easily ebb and flow. What if the business makes no revenue for 2-3 months? What if you expect to pay yourself $50k for the year, but the business only makes $40k total?

Given all of the unknowns, how can the payment of a "normal salary" be a requirement? And if it's not, what is the actual requirement?

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  • Did your S-Corp generate any income at all? From what you've described so far it sounds like you're only starting, maybe the issue is moot because there was no actual business activity? The reasonable salary comes into play only if there's net income, otherwise no-one cares that you don't pay yourself (this is exactly the opposite from C-Corps - in S-Corps salaries increase taxes, in C-Corp they reduce them).
    – littleadv
    Dec 27, 2022 at 6:59

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...suggesting a weekly or bi-weekly payment that amounts to a pre-determined figure at year's end...

There is no rule that a salary be paid regularly.

As a single S-Corp owner, I had some years where I paid myself once on Dec 31 with the entire year's salary. One of those years consisted of taking draws throughout the year, and my accountant converted them to either salary or distributions on Dec 31. That year my salary check netted zero and I still had to write a check for the payroll and withholding taxes due in the beginning of January, so make sure to prepare for that if you go this route (of taking uncategorized draws throughout the year).

I also had some years where I took salary monthly, but skipped some months when cash flow was low.

The "reasonable" rule for salary and S-Corps only applies to the total year's W2 amount, not the frequency in which it's paid.

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  • Thanks for this. Did you also just pay FUTA taxes once, in that year that you paid yourself once on Dec 31?
    – number41
    Dec 27, 2022 at 3:56
  • @number41 yes, I paid both FUTA and SUTA. You get a 5.4% credit from SUTA though, so the effective FUTA rate is only 0.6% on $7K, or just $42 per employee per year.
    – TTT
    Dec 27, 2022 at 7:15
  • thanks, yes I noticed that, I’m in NJ though and can’t seem to find anything about the SUTA there. How did you find out how to pay your state SUTA?
    – number41
    Dec 27, 2022 at 17:43
  • @number41 Here's the website for NJ SUTA.
    – TTT
    Dec 27, 2022 at 18:25
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    @littleadv I agree, and I even considered removing those sentences to avoid confusion. The important thing here is that the salary payments were never backdated, as only 1 existed on Dec 31. In the years where I took salary on a monthly basis, but only sometimes, I paid the taxes monthly too.
    – TTT
    Dec 27, 2022 at 23:18

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