Wages vs Distributions

Many business owners of S-Corps ask why they have to take wages vs distributions. IRS requires that you be paid reasonable compensation. IRS will look at what you have taken in distributions vs wages. If you have $0 in wages and $50,000 in distributions, the IRS might reclassify the distributions as wages. If that happens you could be in for late filings and penalties and interest on for 941 for each quarter.