Does an Uber Black driver with an S-Corp need to pay a salary?

Hot Discussion
1

I started an Uber Black business under an S-Corp in June 2023. I reported a loss for that year. This year, I’m expecting to receive a 1099 from Uber for $140k, but my bank deposits show $95k after expenses. About half of my income goes to expenses and car depreciation.

I recently heard that if you run an S-Corp, you need to pay yourself a salary, but I haven’t set up payroll yet. A friend told me I could still set up something around $7,000 before the year ends. My CPA said I don’t need to pay a salary this year and can start payroll next year, but I’m not sure if that’s correct. Should I find another CPA to handle this, or can I still report a loss this year?

2

Are you taking any money out of the business for personal use? If you are, then you need to pay yourself a salary.

3

Is the S-Corp paying you anything, or are you using any of the business funds for personal expenses? If so, you must pay yourself a reasonable salary. After that, if there’s profit left, you can take distributions.

And no, $7k for the whole year is not even close to a reasonable salary. With $140k in revenue and about $70k in expenses, your business would have $70k left before paying your salary. You cannot report that as a loss.

4

You should work with someone who knows how to manage an S-Corp. Setting it up is one thing, but handling it properly is just as important.

5

Ellis said:
You should work with someone who knows how to manage an S-Corp. Setting it up is one thing, but handling it properly is just as important.

The person said they already set it up last year.

6

If the S-Corp is running at a loss and you’re not taking any money or distributions, then you don’t need to pay yourself a salary. But if you’re taking money from the business, you must pay a salary.

7

Yes, you need to pay yourself a reasonable salary through payroll. Whoever helped you set up your S-Corp didn’t explain this properly.

8

You must pay a salary before taking any distributions.

9

The salary has to be reasonable, not just a small token amount.

10

What is a black business? Taxes don’t care about color.

11

Jordan said:
What is a black business? Taxes don’t care about color.

Uber Black is a premium service with luxury cars and highly rated drivers. It doesn’t affect the tax discussion, but now you know.

12

@Marley
Didn’t know that was a thing. Well, you learn something new every day.

13

Jordan said:
What is a black business? Taxes don’t care about color.

Maybe Google what Uber Black is first? It’s required to set up a corporation to run this service.

14

Darcy said:

Jordan said:
What is a black business? Taxes don’t care about color.

Maybe Google what Uber Black is first? It’s required to set up a corporation to run this service.

You could have just set up an LLC, which would be taxed as a sole proprietorship. An S-Corp isn’t always necessary for this type of work.