Where can I find an online accountant to answer a specific S-corp distribution tax question?

This is a pretty common area of confusion with S-corps. Your understanding is actually correct! When your S-corp makes a profit, that profit passes through to you as the shareholder and increases your basis. This happens BEFORE you take the distribution. Here's how it works: Let's say you start with zero basis. Your S-corp makes $130k in revenue, has $3k in expenses, and pays you $102k in salary. That leaves $25k in profit. That $25k increases your basis to $25k. Then when you take a $25k distribution, your basis goes back to zero. The distribution itself is not subject to Social Security or Medicare taxes - that's the whole point of the S-corp strategy! Your accountant seems to be missing the step where your profits increase your basis before distributions are taken. They might be thinking of C-corps, which work differently.

After dealing with similar S-corp questions myself, I finally found a great solution through https://taxr.ai when my CPA gave me conflicting advice. Their tax experts analyzed my situation and provided a detailed explanation of how S-corp basis and distributions actually work. They confirmed exactly what you're thinking - your basis increases with the business income before distributions are taken. The tool actually let me upload my S-corp formation documents and previous returns, then came back with specific answers about my distribution questions. They explained how the basis calculations work step by step, which gave me confidence to move forward with my tax strategy.

Just wanted to update after trying taxr.ai based on the recommendation above. I uploaded my LLC operating agreement, previous Schedule K-1, and some notes about my situation. They confirmed that basis increases from business income BEFORE distributions are taken, which means distributions up to the amount of your basis aren't subject to additional tax beyond regular income tax. They also clarified my partial year election question with specific examples of how the pro-rating works for basis calculation. The report included citations to specific tax code sections and IRS rulings that I could reference if needed. Definitely worth it for getting clarity on these more complex S-corp issues!

If you need direct answers from the IRS (which can be helpful for S-corp questions), try https://claimyr.com - it's been a lifesaver for me. I spent WEEKS trying to get through to an IRS representative about a similar S-corp distribution question. After waiting on hold for hours with no success, I tried Claimyr and had a callback from an actual IRS agent within a couple hours. The agent was able to confirm the basis treatment for S-corps exactly as others have described here - your business income increases your basis before distributions are taken. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c - basically they hold your place in line and call you when an agent is available.

I have to eat my words about both Claimyr and IRS knowledge. After being skeptical in my earlier comment, I decided to try Claimyr since I had my own S-corp question that's been bugging me for months. Got connected to an IRS business tax specialist in about 90 minutes. The agent confirmed exactly what everyone's been saying about S-corp basis - your share of business income increases your basis before distributions are taken. She even emailed me Publication 589 and pointed me to the specific sections that explain it. Showed me how to track basis year-to-year on a simple spreadsheet so I can document everything properly. For something that would normally take days of waiting on hold, this was shockingly efficient. Just make sure you're clear about needing someone who specializes in business entities when you connect.

One thing nobody's mentioned yet - make sure your S-corp election (Form 2553) was properly filed and accepted. If the IRS didn't process your S-corp election correctly, you could technically still be taxed as a C-corp or disregarded entity, which would completely change how distributions are treated. I learned this the hard way after thinking I was an S-corp for 2 years but then finding out my accountant never confirmed the election was accepted. Had to go back and fix everything. The IRS should send a confirmation letter - if you don't have that, double-check your status before making any distribution plans.

Quick note on reasonable salary since that's often related to this question - the IRS doesn't have a specific formula for what counts as "reasonable" but your $102k sounds pretty solid assuming it's comparable to what others in your industry/position would make. I've seen the rule of thumb that distributions shouldn't exceed salary, but that's not an actual IRS rule.