I own an s corp with a partner. We each own 50%. For 2008 we will each take about 35k in payroll and each take about 27k in distributions. My understanding is that we each pay taxes on our payroll and each pay about 15% on the distributions we get. The K-1 flows into each of our personal taxes. We want to calculate our taxes without the K-1 considered first and then with the K-1 considered to see what the difference is. The difference will be what we each will pay in taxes for the non disbursed profit of the company. We want to see what this difference is so the company can then disburse an amount to each of us to cover the taxes owed which the company did not actually disburse. This is where our question lies. I am married with 2 children and he is filing single. So the taxes he pays on this difference will be higher than mine. The s corp must distribute like amounts to each of us by law (again, my understanding). So, if for example he owed 7k and i owed 5k on this non disbursed profit and the company disburses 7k to each of us, am I getting a 2k "bonus" or are we each getting paid evenly except that our personal tax status's effect how much of that 7k we each get to keep? We want this to be fair. How is this handled? Do s corps do this sort of thing? Should we disburse the lower of the 2 amounts? Should I take the 2k and write him a check for 1k (would I then be paying part of his tax burden)? Any informed opinions would be greatly appreciated.