Must I Pay Myself A Salary?

As an employee of your corporation, you should be drawing a salary that is reasonable for the services you provide to it. The Internal Revenue Service (IRS) may adjust your salary in audit if they feel it is too low (especially in the case of an S-corporation) or unreasonably high.

Any other money you draw from the corporation, including the payment of personal expenses with corporate funds, must be charged to you as dividends (taxable to you, but not deductible by the corporation) or treated as a loan (which must be repaid, and with interest if it goes over $10,000 at any point.)

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We do not offer legal advice. All information provided on this website is for informational purposes only and is not a substitute for proper legal advice. If you have legal questions, we recommend that you seek the advice of legal professionals.

Tax Disclaimer: To ensure compliance with IRS Rules, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.