S-Corp Year End Cash - Reserve or Payout?
I am half of a 2 man S-Corp. We do IT consulting, so it is basically cash in, payroll out after a few monthly expenses. We have been paying ourselves at a consistent rate this year as we have looked at our pipeline - giving ourselves raises as the year progressed. Now as year end approaches, we could conceivably have $20-30K extra after our December payroll in the bank. My accountant told me to do a year end payroll to clear out the majority of the rest - carrying very little over (we were leaner last year and ended up with $10 at year end). I understand this strategy from a payroll tax standpoint since we have met our SS/Medicare limits for the year, but we roll into the new year with no reserves and business is slowing down. I guess whether it is in the business account or my bank account, it does not matter - but if I leave it in the business, do we sort of get double taxed?
I am just asking for a "second opinion". Like my accountant, but she is not always easy to pin down.