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Originally Posted by Rapture
I have an LLC with and S-Corp tax elective. I'm still learning how this all works and my question is about dividends. I paid myself and my partner (members) dividends this year, meanwhile thinking I was paying us a salary and would do a 1099 at the end of the year. Now I found out I can't do it that way and have to pay at least one of us a salary with a W2. Needless to say a big pain in the neck. My questions is; can I pay large dividends and a small salary? Would that be the best thing to do with the best tax advantage? Is that sending up red flags to the IRS? I want to pay my share but I also want to do what I can that has the best tax advantages.
Any other suggestions or info. would be great, especially if coming from a CPA. I have a bookkeeper but not a CPA yet. My bookkeeper isn't sure and doesn't want to lead me down the wrong path. Thanks.
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The laws have changed.
There used to be things that you could do with a salary, that you could not do with a dividend income.
The difference being basically the distinction between an 'at risk' active activity, and a 'not at risk' passive activity.
Hopefully someone else will respond with the current laws on this.
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