My partner and I formed an LLC taxed as an S-Corp.

We've been paying ourselves $5000 a month each.
I assumed that we could pay ourselves as we would pay a contractor, and report this on a 1099-MISC. Then when filing my personal tax return, I would pay the tax owed. Of course I already paid quarterly estimated taxes.

Is this indeed correct? Or do I need to be an employee and does my company have to withhold tax? Reason is, I just found out that I need to quarterly report wages paid.

Thank you for insight.

Peter

Actually, you need to be an employee of your company and need to take a salary and with the appropriate payroll withholding taxes related to that salary. The withholding taxes would be Federal, State and Social Security/Medicare taxes.

As an Owner of an S Corporation, generally speaking, you cannot take a 1099-Misc payment as the IRS rules require you to take a Reasonable Compensation. You are however, allowed to take distributions from the profits but, the condition for this is that you should take a Reasonable Compensation.

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