Your brand paid you in distributions this year because the cash went to inventory, and your salary was set when the brand was a third of this size. December is when the Black Friday payouts land, the last payroll of 2026 runs, and three numbers lock for the year: your salary, your retirement deferral, and whether your kids' pack-station wages will hold up. On October 14 the Social Security Administration set the 2027 wage base at $192,300, from $184,500. On November 5 the IRS set the 2027 standard deduction for a single filer at $16,600, from $16,100.
The direct answer: decide the owner's total 2026 W-2 now, run the deferral through a 2026 payroll, and document the family wages before W-2s go out in January. Everything else about 2026 compensation can be fixed on the return; these three cannot.
Your salary: reasonable for the jobs you actually do
An S corporation officer who works in the business has to be paid wages before taking distributions; the IRS treats distributions to a shareholder-officer as wages to the extent they are reasonable compensation for services performed. For an ecommerce founder the comparison is what you would pay someone to do your jobs: head of marketing, buyer, operator, and the person who answers the 3PL at eleven at night. A $40,000 salary on $4 million of profit, with the rest as distributions, is the pattern that draws the question.
The price of salary is payroll tax: 6.2% from the employee and 6.2% from the company for Social Security on wages up to $184,500 in 2026 and $192,300 in 2027, 1.45% from each side for Medicare, plus 0.9% withheld above $200,000. As an illustration only, a salary at the 2026 wage base carries about $22,878 of Social Security tax across both sides; at the 2027 cap, about $23,845. That $967 is the cost of the new cap for an owner paid at the maximum, and it is small next to the reason salary is more than a cost in an ecommerce brand: with fulfillment at a 3PL and marketing at agencies, the owner's W-2 is often most of the company's W-2, and above the QBI threshold the 20% deduction is capped by W-2 wages.
Your 401(k): the deferral has to leave a 2026 paycheck
The 2026 deferral limit is $24,500, plus an $8,000 catch-up at 50 and over, or $11,250 at ages 60 to 63. A deferral comes out of wages actually paid: whatever has not left a paycheck by the December run does not happen for 2026, a January catch-up payroll is a 2027 deferral, and a distribution from the December payouts does not count. If you are 50 or older and your 2025 wages from the company were above $150,000, the catch-up must be Roth, and the plan has to allow Roth or there is no catch-up.
The company's side has more room. Profit-sharing is limited to 25% of W-2 compensation, and total 2026 contributions are capped at $72,000. The employer contribution can wait until the return's due date, but the wages it is measured against must be paid this year. As an illustration only: reaching $72,000 with a $24,500 deferral takes about $190,000 of 2026 W-2, because 25% of $190,000 is $47,500. Above that, the tool is a defined benefit plan, where the 2026 benefit limit is $290,000 a year and the contribution depends on age and an actuary.
Your kids: real work at peak
Peak season has real work for a fifteen-year-old: packing, inventory counts, product photos, customer service replies. For an S corporation the wages carry income tax withholding, Social Security, Medicare, and federal unemployment tax; the under-18 exemption applies only to a parent's sole proprietorship or a partnership of the parents. What makes them hold up: a real job, hours recorded as they happen, pay a stranger would get for the same shift, and a W-2 at year end. A child with no other income has a $16,100 standard deduction for 2026 and $16,600 for 2027, and earned wages let the child fund an IRA, up to $7,500 for 2026.
Four numbers to ask for before the last payroll
- The owner's year-to-date W-2 next to the reasonable compensation figure on file, and its support.
- Deferrals to date against $24,500, or $32,500 with the catch-up, and whether the rest is scheduled for the December run.
- The employer contribution the current W-2 supports, and whether $190,000 is the right 2026 target.
- Each family member's hours log, pay rate, and W-2.
Where your facts change the answer
A partnership or sole proprietorship has no owner W-2; the owner pays self-employment tax and the retirement math uses net earnings. Plan documents set adoption deadlines and whether Roth deferrals are allowed, so the plan administrator outranks this article. The 2027 plan limits were not published as of November 9. The illustrations are arithmetic, not a salary recommendation.
If the owner's 2026 W-2 was set by habit rather than by these three numbers, that is the tax planning question to settle before the December payroll closes. The S corporation guide covers the entity.
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