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Yes. Even though a Coeur d’Alene S-Corporation uses a pass-through taxation method, owners/shareholders are able to differentiate between a wage and a disbursement. However, a reasonable wage must be paid out to those working in the business before any disbursements are paid out to other owners/shareholders. This reasonable wage must have been paid on a W-2 with employment taxes paid.

A reasonable wage is best determined by the replacement cost of that position on the open market.

Example

If the Idaho S-Corporation profited $58,000 this year and a reasonable wage is $75,000, then all $58,000 must be paid as the reasonable wage. Until the reasonable wage has been met, no disbursements can be made.