S-Corp Owner, No Payroll, Need 1120-S Help
I own a single-member S-corp. In 2024, I had one client, earned ~$37k via 1099, and did not run payroll — I transferred funds directly to my personal account. I know this raises an IRS "reasonable salary" issue. I need help assessing my exposure, whether corrective action is needed, and filing my 1120-S.
Quick Answer:
Your concern regarding a reasonable salary for your single-member S-corp with $37,000 in 1099 income and no payroll is valid. The IRS expects S-corp owner-employees to take a reasonable salary for services provided, subject to FICA taxes, before taking distributions.
Your exposure lies in the IRS reclassifying your direct transfers as wages. This
Note: This answer is provided for convenience only. It is important that you speak to a CPA about your individual tax situation.
