S Corporation Tax Question - Disburse at end of year?

**cg410** · 01-01-2010 02:16 PM

Typically, when you get dividend income from an S Corporation, you're supposed to pay estimated taxes throughout the year. That is, if you put on your personal income tax form that you received $10,000 in dividends, it's assumed that you got $2,500 per quarter... unless you file another form saying otherwise.

But, what if the S Corporation technically "disburses" to you on 12/31, and then all money you take from the corporation throughout the year is simply an interest-free loan, which is paid back by your 12/31 disbursement? Could you get around paying estimated taxes this way?

**DerekS** · 01-02-2010 02:48 PM

If you put $10k in dividends received on your income taxes, it is not implied that you paid estimated taxes on them unless you state that you actually did so (Form 1040-ES)

I'm not sure if I'm following your second question. Who is disbursing and who is receiving? Your estimated tax liability depends on how much income you are taking each quarter. You can minimize/avoid penalties if you can show that you earned most of that income in the last quarter of the year. Any income shown in earlier quarters will be subject to penalties. Remember that this is based on your taxable income, so a loss shouldn't be subject to est tax payments.

**LLCtaxes** · 01-06-2010 05:15 PM

Your best bet is to speak to your CPA, or hire one. This sort of thing is not the same for everyone.

**cg410** · 01-09-2010 12:59 PM

LLCtaxes: What are you talking about? It's the same for everyone in my situation.

For clarification, the question is: If I own an S-corp and take money out of the company by dividend, can I file with the IRS that the dividend was a year-end disbursement (for the purpose of avoiding pre-payment penalties) even if I was actually taking the money all year long, by justifying the money I was taking all year long as an interest-free loan that was paid back by the year-end disbursement?

Originally Posted by LLCtaxes

Your best bet is to speak to your CPA, or hire one. This sort of thing is not the same for everyone.

**DerekS** · 01-10-2010 10:37 PM

I'm not an accountant, but I would think that you'd be subject to pre-payment penalties if your business's books show you taking the dividend in any quarter other than 4. They don't care what you call it, if you're taking dividends throughout the year they'll treat it as income as you receive it. If you're not showing the money as credits and debits on your books (and an audit of your bank records isn't done), you may be able to pull it off. You'd need to keep it ALL off the books though.