Why S Corporation Payments Are Almost Always Wages

Law360 (March 30, 2021, 4:49 PM EDT) -- I think of corporations as a type of vessel that sails the seas of commerce. Like real ships, corporations are commanded by officers. All crew, including officers, are compensated for their services. At the end of the commercial voyage, however, an end marked either by time or transaction, profits earned are distributed to the owners of the ship. 

When the corporate officers are also the owners it becomes difficult to distinguish payments that represent wages — for their services in commanding the ship — from payments that represent distribution of profits. Yet for both employment and income tax reasons, such distinction...

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