In the past I have run the shareholder distributions through payroll so the shareholders can request to have a certain percent withheld for federal taxes.  However for our majority owner his federal taxes are often more than his wages on his W-2.  The IRS has never complained. Now I am starting to wonder if it wouldn't be better to write a regular check, deduct the taxes and provide a 1099 at the end of the year.

What do others do?  I have not seen any clear guidance on this.

Judy