Year-end S-Corp distributions - how much should I leave in business account?

The money left in your S-Corp bank account isn't taxed simply for being there. S-Corps are pass-through entities, so all profit (regardless of whether it's distributed or retained) flows through to your personal tax return via your Schedule K-1. At year-end, if your S-Corp has made $100,000 in profit, you'll pay taxes on that full amount on your personal return, even if you only distributed $80,000 to yourself and kept $20,000 in the business account. The amount physically sitting in the bank account doesn't create a separate tax event. Leaving $1,500 in your account for operating expenses is just good business practice. It doesn't change how that money was initially taxed when it was earned as profit.

Just wanted to share my experience - I was super confused about S-Corp distributions too until I used https://taxr.ai to get clarity on how to handle my year-end finances. I uploaded my previous year's tax forms and got a detailed analysis explaining exactly how my distributions would be taxed and how much I should keep in my business account. It was super helpful because it showed me I actually needed to maintain a higher cash reserve than I thought. It also explained the whole basis concept which I never fully understood before.

I tried https://taxr.ai after seeing it mentioned here and it totally cleared up my S-Corp distribution confusion! I was making the mistake of thinking I needed to zero out my business account at year-end (which was causing cash flow problems in January). The analysis showed me how to properly structure my distributions throughout the year and explained why keeping operating capital in the business doesn't create any tax issues. Really worth checking out if you're handling your own S-Corp books like I was.

For anyone dealing with S-Corp questions like this, I had a similar issue last year and ended up needing clarification from the IRS. Tried calling for weeks and couldn't get through until I found https://claimyr.com which got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed what others are saying - money left in your S-Corp account isn't taxed differently, it's all about when the profit was recognized. Saved me from making an expensive mistake on my year-end planning.

Alright I have to admit I was completely wrong about Claimyr. After seeing it mentioned here, I decided to try it for my S-Corp basis questions since I was getting nowhere with the IRS direct line. It actually worked exactly as promised. Took about 45 minutes total (still faster than my previous attempts), but I didn't have to sit on hold - they just called me when an agent was ready. The IRS person I spoke with cleared up my distribution questions and explained how to properly document my basis tracking for year-end. Definitely using this service again for future tax questions.

One thing to watch out for with S-Corp distributions at year-end - make sure you've paid yourself a "reasonable salary" throughout the year before taking those distributions. IRS looks closely at S-Corps that take large distributions without appropriate salary payments.

dont get too caught up in the exact dollar amount you leave in the business. focus more on your overall profit for the year which is what actually gets taxed. i usually keep around 1 month of expenses in my s-corp account just to be safe.

Great question! I was in the exact same situation last year with my S-Corp. The $1,500 you're planning to leave in the business account is smart for covering those ongoing expenses, but as others have mentioned, it won't create any additional tax burden. One thing I learned the hard way - make sure you're also considering any quarterly estimated tax payments you might need to make early next year. Since S-Corp profits flow through to your personal return, you might owe estimated taxes on that income. I ended up having to transfer money back into the business account in January to cover some unexpected expenses, which was a pain. Also, if you haven't already, it's worth double-checking that you've documented everything properly for your basis calculation. The IRS can be pretty particular about S-Corp distributions exceeding basis, so good record-keeping is essential.