New S-Corp Owner - How Often Should I Pay Myself a Salary?

I'm pretty new to this whole S-Corp thing and could use some advice. I converted my business from a sole proprietorship to an S-Corp back in March after running it on my own for several years. Besides myself, I have two employees who get regular paychecks through the payroll service I've been using for years, so their tax withholdings and all that stuff is taken care of. My problem is with paying myself. I never added myself as an employee with my payroll company and have just been paying myself the same way I did when I was a sole proprietor. I know that as an S-Corp owner/sole shareholder I need to take a "reasonable salary" and I've read about that 60/40 split between actual income and distributions. What I'm worried about now is the frequency of payments. I should have been paying myself a regular salary from the beginning, but it's already November and there's just one month left in the year. Can I just make one big salary payment to myself before December 31st to satisfy the requirements for this year? Or is that not how it works with S-Corps? Do I need to have been making regular payments throughout the year?

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21 comments

Amara Torres

•8M

The IRS doesn't actually specify a required frequency for S-Corp owner salary payments, but they do look for patterns that suggest you're trying to avoid payroll taxes. Taking one lump sum salary at year-end isn't ideal, but it's better than no salary at all for your first partial year as an S-Corp. The key is making sure the amount represents a "reasonable salary" for your industry and the work you perform. The 60/40 split you mentioned is a common rule of thumb, but there's no hard rule - it depends on your specific business. Going forward in the new year, I'd recommend setting up regular salary payments (monthly or bi-weekly) to establish a clear pattern. This looks better if you're ever audited and makes your financial planning more consistent. Make sure you run this through proper payroll with all appropriate withholdings. And definitely get yourself set up with your payroll service ASAP to handle all the proper tax withholdings, quarterly filings, and year-end W-2 reporting!

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Amara Torres

•8M

For that one-time payment, you'll need to make sure all appropriate taxes are withheld and deposited with the IRS. Since it's your first payroll for yourself, you'll file the appropriate quarterly forms for Q4. You'll need to account for Social Security, Medicare, federal income tax withholding, and any state/local taxes. Your payroll service can help set this up correctly. Waiting until January is risky. The IRS expects S-Corp owners to take a reasonable salary if the business is profitable. If you've been taking money out of the business this year but classified none of it as salary, you could face issues during an audit. They might reclassify your distributions as salary retroactively and assess penalties and interest on the unpaid payroll taxes.

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Mason Kaczka

•8M

I was in almost the exact same situation last year! After struggling to figure out the whole S-Corp payment thing, I found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much stress. It analyzed my business finances and actually helped me determine what a "reasonable salary" should be for my specific industry. What I liked is that it took into account my business's profitability and gave me specific guidance on the salary vs. distribution split, saving me from guessing about that 60/40 ratio. It also flagged exactly what I needed to do about my missed regular payments by showing me similar real-world case examples. The thing that helped me the most was that it showed me exactly what documentation I needed to keep to support my salary decisions in case of an audit. As a new S-Corp owner, I had no idea how important proper documentation was!

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Mason Kaczka

•8M

It definitely helped with my late-year payment! It showed me how to properly document my decision for a year-end salary payment and how to structure it correctly. The tool explained that while regular payments are preferred, a documented year-end salary based on actual profit can be justified for a new S-Corp's first year. It can import data from QuickBooks, Xero, and other accounting software, which saved me a ton of time. I just connected my QuickBooks account and it pulled everything it needed. The tool uses industry-specific data from multiple sources to establish reasonable salary ranges. It analyzes factors like your location, revenue, duties performed, and what comparable positions would earn in your market. It doesn't just give one number but provides a defendable range with documentation backing it up. What I appreciated was that it explained the multiple factors the IRS considers for "reasonableness" and how my specific situation fit into those parameters.

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Sophia Russo

•8M

Just wanted to follow up - I tried taxr.ai after seeing this post and it was actually super helpful! I was stressing about my S-Corp salary situation (only been paying myself randomly throughout the year), and it gave me really specific guidance. It analyzed my business financials and showed me exactly what would be considered reasonable for my industry and region. The documentation feature was clutch - it created a detailed report justifying my salary decision that I can keep on file in case of an audit. The best part was that it showed me how to properly structure my year-end catch-up payment and what documentation I needed to maintain. Definitely worth checking out if you're in this situation. I feel so much more confident now about my approach!

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Dominic Green

•8M

After months of trying to get through to the IRS about a similar S-Corp salary question (literally 14 calls, always disconnected), I finally found Claimyr (https://claimyr.com) and they got me connected to an actual IRS representative in about 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to ask specifically about my situation with irregular owner payments in my first year as an S-Corp, and the agent walked me through exactly what I needed to do to stay compliant. They explained that while regular payments are preferred, what matters most is that the total annual amount is reasonable for the services provided. The IRS agent also gave me specific guidance on how to document my decision-making process for determining a reasonable salary, which was super helpful for avoiding issues down the road.

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Dominic Green

•8M

It basically uses technology to automate the calling process. Instead of you having to manually redial over and over, their system handles that part and then calls you once it gets through to a representative. It saves you from having to sit through the hold music and constant redialing. They're not skipping the queue - they're just handling the frustrating part of the process for you. Once you're connected, it's a normal call with an IRS representative. I was skeptical too, but I had spent literally hours trying to get through on my own without success. With Claimyr, I was talking to someone in about 20 minutes without having to do anything except wait for their call. I was actually surprised by how helpful the IRS agent was once I finally got through. They walked me through the specific requirements for S-Corp owner compensation and explained that while consistent payments look better, what really matters is the annual total being reasonable and properly documented. They even emailed me some reference materials afterward.

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Kayla Jacobson

•8M

I need to apologize to Profile 9 - I just tried Claimyr after dismissing it, and I'm honestly shocked that it worked. After months of trying to reach someone at the IRS about my S-Corp salary structure, I was connected to an agent in about 30 minutes. The agent confirmed that for a new S-Corp, they understand that payment patterns might be irregular in the first year. What's most important is that: 1) The total annual compensation is "reasonable" for your role and industry 2) You properly document how you determined this amount 3) You properly withhold and pay all applicable payroll taxes She specifically mentioned that while regular payments are ideal going forward, a year-end adjustment salary for a new S-Corp is not uncommon and won't automatically trigger problems. The key is documentation and making sure the amount makes sense for your role. Definitely worth the service if you're struggling with specific S-Corp questions like this!

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William Rivera

•8M

One thing nobody's mentioned - if you do a single large payment in December, make sure you have enough cash reserves to cover the employer portion of payroll taxes! That caught me off guard my first year. For a rough estimate, plan for about 7.65% employer portion of FICA (Social Security + Medicare) on top of what's withheld from your check. Plus, you'll have the employee portion withheld from your gross amount, so the actual cash you take home will be significantly less than the stated salary. Also, if your S-Corp is in a state with additional payroll taxes or requirements (like my state's Employment Training Tax), factor those in too. The last thing you want is cash flow issues because you didn't budget for all the payroll tax components of a large year-end payment.

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William Rivera

•8M

I'd recommend working backwards from the net amount you need to take home. Most payroll calculators can do this - you input the net amount you want and they'll calculate the gross amount needed. For a quick approximation, figure your federal income tax withholding based on your tax bracket (probably 22-24% for most small business owners), plus 7.65% for the employee portion of Social Security and Medicare. Then add state income tax if applicable. That gets you the approximate gross salary needed to achieve your desired take-home amount. Then add another 7.65% on top of that gross amount for the employer portion of FICA that your business will need to pay. Don't forget state unemployment insurance and any other local payroll taxes your state might require. Most payroll services have calculators that can do this more precisely, or your accountant can help run the numbers to make sure you're setting aside enough for all tax obligations.

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Mia Roberts

•8M

Just want to add my experience as an S-Corp owner for 5+ years. What's worked for me is picking a consistent, reasonable monthly salary and sticking with it year-round, then taking quarterly distributions based on profitability. This makes everything cleaner for accounting and looks better to the IRS. For your situation this year, a one-time payment will work, but I'd strongly recommend getting on a regular schedule starting January. It's so much easier to manage cash flow when your owner compensation follows a predictable pattern. Also, the whole "reasonable salary" thing isn't as scary as it sounds. It doesn't mean you have to pay yourself market rate if your business can't afford it. It just means you can't take $1 in salary and $100K in distributions to avoid payroll taxes. As long as you're making a good faith effort to pay yourself fairly for your actual work, you'll be fine.

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Danielle Campbell

•4M

Given that you've been taking money out and the business has been profitable, I'd definitely recommend doing the lump sum salary payment in December rather than waiting until January. Here's why: The IRS could potentially reclassify those distributions you've been taking as salary subject to payroll taxes if they determine you should have been paying yourself wages all along. By making a reasonable salary payment now, you're showing good faith effort to comply with S-Corp requirements. Calculate a reasonable annual salary based on what you'd pay someone else to do your job, then subtract any amounts you might have already run through payroll (sounds like zero in your case). Pay yourself that amount as salary in December with proper withholdings. Starting January, set up that regular monthly or bi-weekly schedule. The combination of addressing this year properly plus establishing a clean pattern going forward puts you in a much stronger position if there's ever any scrutiny. Your accountant can help you determine the right amount, but don't let perfect be the enemy of good - a documented, reasonable salary payment now is far better than nothing.

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Mia Green

•4M

I'd definitely echo what others have said about making that lump sum payment in December rather than waiting. As someone who's dealt with similar timing issues, the IRS is generally more understanding about irregular payments in your first partial year as an S-Corp, especially if you document your reasoning well. One practical tip - when you calculate your reasonable salary amount, keep records of how you arrived at that number (industry research, comparable positions, etc.). I learned this the hard way when my accountant asked me to justify my salary decision later. Also, don't stress too much about the exact percentage split between salary and distributions. The key is that your salary reflects the value of services you actually perform for the business. If you're doing the work of a $60K employee in your industry, then that's a defensible salary regardless of what your total business income is. For next year, I'd suggest setting up automatic monthly salary payments through your payroll service. It makes everything so much cleaner and takes the guesswork out of compliance. You can always adjust the amount quarterly if your business performance changes significantly.

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Ev Luca

•4M

This is really helpful advice, especially about keeping documentation! I'm curious - when you say "industry research," what specific sources did you use to justify your salary decision? I'm in a pretty niche field and I'm worried I won't be able to find good comparable data to support whatever amount I choose. Did you use Bureau of Labor Statistics data, or something else? Also, how detailed does that documentation need to be - just a one-page summary or something more comprehensive?

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