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re: S-Corp - Paying Myself A Salary (help needed)
Posted on 7/2/19 at 7:12 pm to VABuckeye
Posted on 7/2/19 at 7:12 pm to VABuckeye
I own an appliance sales and service company and for many years thought the same thing, but now I have an energetic 20 something employee wanting to become a successful businessman. Hopefully his credit improves enough over the next 10yrs that he can buy me out. May even consider partial owner financing but the S-Corp thing kinda has me hamstrung from what I understand.
0
Posted on 7/2/19 at 10:24 pm to VABuckeye
I have never had the guts to go the S corp way and work out a reasonable salary. I cant see arguing it much below the Social security cap and thus would only be saving 3% or so after that. I would also lose the right to use an HRA for my employee wife... just never made sense to me unless I could argue a 'reasonable' salary was way below SS limit. But as a sole proprietor consultant type - hard to argue salary is that minimal.
But then again I am a chicken.
But then again I am a chicken.
Posted on 7/2/19 at 10:48 pm to Cousin
We use ADP. I set my salary comparable to my industry and make much more on the K1. I don’t like payroll taxes. Also, not sure if you have to carry WC insurance, but be sure to exclude yourself unless you plan on suing yourself.
This post was edited on 7/2/19 at 10:49 pm
Posted on 7/3/19 at 8:09 am to Spasweezy
Pay yourself enough to not get audited. I do 36,000 a year and SS and payroll tax come out of that. CPA told me to do this and calculated how much to pay in taxes. The business pays for everything else like Car notes, fuel, insurance, cell phones, office space.
Posted on 7/3/19 at 9:49 am to broadhead
Yeah I still have a respectable salary and banks like to see the W2 income so I keep it high enough to make everyone happy.
Posted on 7/4/19 at 9:50 pm to Cousin
I use ADP and pay myself $1k per pay period. Everything else is draws. Sounds fair and reasonable to me. 
Posted on 7/5/19 at 1:10 am to BamaAlum02
I like square payroll. Easy and inexpensive. You can process credit cards too - negotiate lower rates
Posted on 7/7/19 at 3:37 pm to Cousin
A little late on this, but I left for vacation and just got back... As to time, it is certainly a matter of what's worth your time. For me, it's just me and an assistant. I spend about 5 minutes a month to process payroll, less than 5 minutes a month for federal tax deposits, about 10 minutes a quarter for state filings, and 30-60 minutes a year for annual filings. So maybe 3-4 hours a year on the high side (and let's be honest, I waste WAAAY more time than this on TD). I'm pretty sure I would be spending at least some of this time reviewing the work of others anyway... Then, I have my accountant doing my books to hopefully notice any glaring errors.
Here is the cheat sheet I made for myself several years ago (personal information of course deleted) that I rarely have to update. And of course, you'll have you're own set of requirements that you can have a CPA review with you for an hour of time if you're unsure of your work...
MONTHLY FEDERAL TAX DEPOSIT:
Federal Tax, Social Security, Medicare (Form 941)
LINK /
MUST MAIL FORM QUARTERLY
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0005
QUARTERLY PAYROLL TAX INFORMATION:
STATE TAX WITHHOLDING: JANUARY 31, APRIL 30, JULY 30, OCTOBER 30TH
LINK /
File L-1
Pay State Withholdings
SUTA:
LINK
ANNUAL FILING REQUIREMENTS:
STATE:
LINK
File L-3 (IN JANUARY: W2/L3 ANNUAL RECONCILIATION)
Manually Enter W-2 Information
FEDERAL:
LINK /
Submit Forms W-2/W-3 Online
FUTA (Form 940)
LINK /
Without Payment:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0005
eta. the previously mentioned Medlin software creates all the forms necessary to submit all these filings.
Here is the cheat sheet I made for myself several years ago (personal information of course deleted) that I rarely have to update. And of course, you'll have you're own set of requirements that you can have a CPA review with you for an hour of time if you're unsure of your work...
MONTHLY FEDERAL TAX DEPOSIT:
Federal Tax, Social Security, Medicare (Form 941)
LINK /
MUST MAIL FORM QUARTERLY
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0005
QUARTERLY PAYROLL TAX INFORMATION:
STATE TAX WITHHOLDING: JANUARY 31, APRIL 30, JULY 30, OCTOBER 30TH
LINK /
File L-1
Pay State Withholdings
SUTA:
LINK
ANNUAL FILING REQUIREMENTS:
STATE:
LINK
File L-3 (IN JANUARY: W2/L3 ANNUAL RECONCILIATION)
Manually Enter W-2 Information
FEDERAL:
LINK /
Submit Forms W-2/W-3 Online
FUTA (Form 940)
LINK /
Without Payment:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0005
eta. the previously mentioned Medlin software creates all the forms necessary to submit all these filings.
This post was edited on 7/7/19 at 4:05 pm
Posted on 7/8/19 at 9:39 pm to Cousin
Quickbooks can handlebookkeeping and payroll but is not that cheap anymore. Any cheap payroll software that can handle preparing and filing payroll returns. Also you can register with EFTPS (electronic federal tax payment system) for making tax deposits.
Posted on 7/8/19 at 10:18 pm to BamaAlum02
I just moved my clients away from QB’s to Gusto payroll. Anyone here with a small business and a handful of employees, I highly recommend.
Posted on 7/9/19 at 5:07 am to Cousin
My CPA has told me to keep it at 60-40 ratio for salary - distributions. Don’t know why other than she says that’s what keeps the IRS happy.
Posted on 7/9/19 at 5:48 am to Cousin
By the way, congrats on the business (actually to all of you).
After working for myself for 10 years, then going back into regular wage employment for the last 4, I’m diving back in again (slowly anyway).
My advice - you will have some stumbling blocks out the gate when starting - with payroll and salary. No worries, you’ll learn.
If you have a very small business (you and a handful of employees or independents), go with QuickBooks (or another, up to you) until you think you need more. Very easy to use. With the salary, my CPA always told me to be accurate and steady in what you pay yourself - keep track of your expenses, and even if you can’t afford to cash your expense or salary check . . . at least cut them until you can cash them.
When I first started, it gave me the incentive to work my arse off.
After working for myself for 10 years, then going back into regular wage employment for the last 4, I’m diving back in again (slowly anyway).
My advice - you will have some stumbling blocks out the gate when starting - with payroll and salary. No worries, you’ll learn.
If you have a very small business (you and a handful of employees or independents), go with QuickBooks (or another, up to you) until you think you need more. Very easy to use. With the salary, my CPA always told me to be accurate and steady in what you pay yourself - keep track of your expenses, and even if you can’t afford to cash your expense or salary check . . . at least cut them until you can cash them.
When I first started, it gave me the incentive to work my arse off.
This post was edited on 7/9/19 at 5:50 am
Posted on 7/9/19 at 2:04 pm to igoringa
quote:
I have never had the guts to go the S corp way and work out a reasonable salary. I cant see arguing it much below the Social security cap and thus would only be saving 3% or so after that. I would also lose the right to use an HRA for my employee wife... just never made sense to me unless I could argue a 'reasonable' salary was way below SS limit. But as a sole proprietor consultant type - hard to argue salary is that minimal.
But then again I am a chicken.
If the IRS ever had the resources to do so, it could blow up half of these S corps with little effort. And pretty much 100 percent of the ones that have situations like yours.
To say the S Corp reasonable salary rules are abused is an understatement.
It's great for companies with a lot of profit that is based upon the work of your employees as opposed to your own efforts.
The "reasonable salary" is supposed to represent your work efforts and be comparable to what you would make if you were a non-owner. That leaves the profit distributions to represent your capital investment return.
Also, a lot of people who like SEPs get upset when they become an S corp and find out their ability to make contributions is much more limited.
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