• Go to page :
  • 1 2
  • Text Only
Voting History
rated:
I have an s-corp and I'm the sole owner/employee. I'll keep this short. I would like a guide on how to pay myself a salary (probably quarterly) and what all taxes that I will need to pay and when.

I would like to at least have federal step by step guide, but a state(arkansas) guide would be nice. I know most things, but need somewhat of a checklist.

I'm also curious one when/how the proper way to take the shareholder distributions?

This post may sound like I'm somewhat of a newbie, but I just don't really want to complicate things.

Thank you

Member Summary
Most Recent Posts
I use Paychex with their tax filing service and while I think it is expensive, it costs me less than $100 per month for ... (more)

polaris (Aug. 06, 2012 @ 3:04p) |

Yes, it does include the preparing of the annual Fed & State tax returns.

Grayson73 (Aug. 06, 2012 @ 3:12p) |

Is there a list of S-Corp deductions or write-offs (which is the correct term)? Some friends mentioned these items:

Busi... (more)

Grayson73 (Aug. 08, 2012 @ 8:36a) |

  • Also categorized in:
Thanks for visiting FatWallet.com. Join for free to remove this ad.

FW is the wrong place if you're looking for someone to hold your hand...

S-Corp is pass-through, which means that profits from the business are passed along to the owner as ordinary income and taxed at their marginal tax bracket.

Your CPA should probably advise you on the following consideration....

"Because shareholder-employees receive both wages and profits from the S-Corporation, there is a strong temptation to pay a lower salary and a higher profit distribution. Wages are subject to FICA payroll taxes. The S-Corporation will pay the employer's share of FICA taxes (7.65%), and the employee will pay the other share of FICA taxes (also 7.65%). Between the S-Corporation and the shareholder, wages are subject to a combined 15.3% payroll tax, plus the shareholder's income tax rate. Profit distributions, however, are not subject to FICA payroll taxes; they are subject only to the shareholder's income tax rate. So all things considered, the shareholder-employee will have a strong preference to pay herself a minimal salary and thereby increase the profit distribution."

http://www.sos.arkansas.gov/BCS/Pages/corporations.aspx#c8

Sounds like you can have money pass directly through to yourself.

I don't think you guys are understanding my question.

I don't need someone to hold my hand. Just a guide to payroll. that has the percentage of the various taxes (fica, medicare, FUTA) and how often you have to pay them. I know what an scorp is and what the benefits are (that's why I have one). I've had an scorp for a few years now. I just wanted to focus on the question at hand. not benefits and large percentages. just a detailed way to pay yourself a salary.

punch in the numbers payroll tax

nothingevertodo said:   "... the shareholder-employee will have a strong preference to pay herself a minimal salary and thereby increase the profit distribution."But then you have an excess compensation problem on the distributions if you are only drawing a minimal salary in order to skirt paying FICA.

Crazytree said:   nothingevertodo said:   "... the shareholder-employee will have a strong preference to pay herself a minimal salary and thereby increase the profit distribution."But then you have an excess compensation problem on the distributions if you are only drawing a minimal salary in order to skirt paying FICA.

that's a gray area and is not my question.

I found the arkansas employer's guide, which I think contains everything. Just need the federal requirements now.

http://www.state.ar.us/esd/Employers/PDF/UI_EMPLOYER_HANDBOOK.pd...

The simplest and most reliable way of getting this right is to see an accountant and have him set of payroll for you. There are lots of accountants who will do this for a very small fee. While doing so, he should be able to give you enough advice on how to reduce your taxes to pay the fee you will owe him.

BradMajors said:   The simplest and most reliable way of getting this right is to see an accountant and have him set of payroll for you. There are lots of accountants who will do this for a very small fee. While doing so, he should be able to give you enough advice on how to reduce your taxes to pay the fee you will owe him.

I'll probably just do this, again. 1st cpa quit responding. 2nd charged way too much money and I found 4 errors in a couple of months. 3rd cpa just ignores me now, after we had a good initial meeting and plan. so now, I have to waste my time "interviewing" another one and hope he/she will do what they say. It's just frustrating

Just a matter of time before basic accounting advice can be outsourced overseas. The unresponsiveness of accountants is rampant and just looking to get outsourced.

Circular E - http://www.irs.gov/pub/irs-pdf/p15.pdf
File 940 yearly, 941 quarterly, and your W-2 and W-3. It's real easy and takes about 15 minutes a quarter and 30 minutes at year end and I do them without any software or payroll processor.

I use BofA automated payroll service for $39/month... Sounds too much, but I do not think a minute about these issues now. It saves a lot of money.
All needed forms and payments are created automatically. Actually, if you need only Fed's stuff - it is free, I pay additional $39/month to add to the pile the state stuff, since do not want to be involve at all.

(P.S. - I do my taxes myself, CPAs are expensive and not useful at all).

borges said:   I use BofA automated payroll service for $39/month... Sounds too much, but I do not think a minute about these issues now. It saves a lot of money.
All needed forms and payments are created automatically. Actually, if you need only Fed's stuff - it is free, I pay additional $39/month to add to the pile the state stuff, since do not want to be involve at all.

(P.S. - I do my taxes myself, CPAs are expensive and not useful at all).


so they will automatically submit all required forms for both state and federal? do they electronically submit payments? I use the EFTPS system normally.

This sounds very promising, I assume I'll have to open a business account with them first

I second paying for a payroll service. I use ADP, pay myself payroll monthly a salary in my scorp and they handle calculating all of the taxes. Because I run payroll, then I have money paid into my state and federal taxes for tax time at the end of the year. Costs like ~$43/month and well worth the money to save me time and the headache of figuring it out. They handle submitting all of the payments for you. The payroll people answered ALL of my questions I had about taxes. I would also recommend talking to other business owners and finding a good CPA that you get along with if you dont have one already.
I then can move money in/out of the business as needed tracking it as owner contributions/withdrawals. The salary income at the end of the year looks like a regular job on the tax return and then the business earnings and my money in/out of the business gets reconciled at the end of the year as business profit/retained earnings.

Costco also does payroll service cheap. You should be able to find an accountant who does payroll processing at a similar rate to what these automated places do. (They could also do cheap book keeping.)

Yes, finding a good accountant is hard, but you have no choice. At sometime in the future you will need an accountant for something, you might was well start looking now.

casino187 said:   borges said:   I use BofA automated payroll service for $39/month... Sounds too much, but I do not think a minute about these issues now. It saves a lot of money.
All needed forms and payments are created automatically. Actually, if you need only Fed's stuff - it is free, I pay additional $39/month to add to the pile the state stuff, since do not want to be involve at all.

(P.S. - I do my taxes myself, CPAs are expensive and not useful at all).


so they will automatically submit all required forms for both state and federal? do they electronically submit payments? I use the EFTPS system normally.

This sounds very promising, I assume I'll have to open a business account with them first

---------------------------------------

"so they will automatically submit all required forms for both state and federal? do they electronically submit payments?"

1) yes,
2) yes.

Small business account is free with them, direct deposit in the same bank is also free.
I can change payroll any time I want.
If you want to save $39/month, - you can file state yourself, but they still prepare all paperwork for you for free.
I have had some issues with them while my ramp up with state (feds go without any problem) and they returned fees for the first 2 months they failed to file my papers in time. Though the major blame is on the very slow state reaction not on them.

If you aren't doing anything complicated (retirement contributions, other salary deferrals, etc...) you don't really need an accountant to handle your filings for you. On the other hand, if you're interested in taking advantage of more of the S Corp benefits, it may be worth it to hire a tax expert. It depends a lot on how much the S Corp brings in and what your overall asset and salary position is.

Additionally, in response to your question, what forms you file and how often you have to file and pay depends on the salary numbers involved.

borges said:   I use BofA automated payroll service for $39/month... Sounds too much, but I do not think a minute about these issues now. It saves a lot of money.
All needed forms and payments are created automatically. Actually, if you need only Fed's stuff - it is free, I pay additional $39/month to add to the pile the state stuff, since do not want to be involve at all.

(P.S. - I do my taxes myself, CPAs are expensive and not useful at all).
I signed up this morning.

I use Intuit Online Payroll. It starts at $25/mo and they offer a 30-day trial. Everything is done electronically, including forms and payments, and you can set up reminders, etc.

I highly recommend something semi-automated, as the penalties for being late on federal payroll taxes are severe.

http://payroll.intuit.com/

Explanation from my CPA:

"S Corporation wages vs. distribution
The IRS requires shareholders of S corporations to take a reasonable salary, yet doesn’t specifically
define reasonable. Often, S Corporation shareholders want to take distributions to avoid the payroll tax
implications. However, generally all payments made to shareholders and corporate officers are subject to
the definition of employee. Therefore, they must also pay Social Security, Medicare (FICA),
unemployment (FUTA) and federal income tax withhold. Payments must be treated as wages and not as
distributions of cash and property.

The only exception with regard to employee designation is for an officer and shareholder of the
corporation who performs only minor or no service to the corporation and does not receive any direct or
indirect compensation. Such officers are not considered employees.

While a ‘reasonable’ salary is not specifically defined, court rulings are used to determine reasonable
compensation. Court considerations for individual cases include: training and experience, duties and
responsibilities, time and effort devoted to the business, dividend history, payments to non-shareholder
employees, comparable business compensation plans, compensation agreements and the presence of a
formula to determine compensation.

Medical and accident insurance premiums for greater than 2 percent shareholder-employees are taxable
income. The amount is reported as a fringe benefit for the S corporation, and treated as wages for
income tax withholding purposes on the Form W-2. These insurance premium payments are not subject
to FICA or FUTA taxes. 2-percent shareholder-employees may take an adjusted gross income (AGI)
deduction on their personal return for amounts paid during the year for medical care premiums if the
medical coverage is established by the S corporation. These payments to the employee must appear on
the employee’s Form W-2 and not on a Form 1099 or Schedule K-1."

Without disrespecting your CPA, there is no requirement that shareholders take a reasonable salary. It's only required when distributions occur. Your CPA also seems to imply in the first paragraph that all payments to shareholder-employees are treated as payroll and not distributions, while, in fact, a portion of the payments can be appropriately treated as distributions.

We also have S-Corps. Do yourself a favor - get an online payroll service to do the heavy lifting. Don't get bogged down in minutiae, spend your time running and growing your business instead.

The payroll service should take care of calculating and submitting (ACH/EFT) all your federal and state taxes and form filings (e-file). You just show up to the site when its time to run payroll and click a bunch of buttons, then download and import their reports into your accounting software.

If your business is profitable, pay yourself a salary along the lines of what you would earn doing the same work for someone else. Don't go real high, don't go real low. Any more money you want to take out of the biz, you write yourself a check and account for it properly on the books (ask your accountant which accounts it posts to). You'll also end up paying federal and state estimated taxes quarterly (personally).

If your business is not profitable, lower your salary to a level you can still live with and don't take cash out of the biz.

IANAL or IANAA, this is just from many years of experience.

I use built-in payroll feature in QuickBooks. Having an accounting system is a good thing for an S-corp, especially if you don't do your corporate taxes yourself. Payroll costs extra but I usually get a QB bundle on sale, sell QB on eBay and keep Payroll for my extension thus making it close to free. Once everything is set up in QB you just run your payroll cycle and QB will draw the money from your account and submit it to the federal and state agencies. At the end of each quarter you'll be able to generate 941 and send it electronically. Same with 940, W2, W3 at the end of the year.

HumDoHamaraDo said:   Just a matter of time before basic accounting advice can be outsourced overseas. The unresponsiveness of accountants is rampant and just looking to get outsourced.

Too late for that. Many of the larger regional and national firms already outsource a lot of tax work.

borges said:   I use BofA automated payroll service for $39/month... Sounds too much, but I do not think a minute about these issues now. It saves a lot of money.
All needed forms and payments are created automatically. Actually, if you need only Fed's stuff - it is free, I pay additional $39/month to add to the pile the state stuff, since do not want to be involve at all.

(P.S. - I do my taxes myself, CPAs are expensive and not useful at all).


In twenty years of doing federal criminal tax cases I never got an appointment from the Federal Public Defenders Office in a tax evasion case where my appointed client had a CPA. That is the cheapest insurance I know. I did have one who had used Jenkins& Gilchrist as tax attorneys on some shelters. Having played the game with CID for years, a CPA reduces your odds of getting their attention exponentially. I have a negative DIFF score and I still use a CPA. The objectivity of someone else looking at the return is priceless.

hobiewahn said:   I second paying for a payroll service. I use ADP, pay myself payroll monthly a salary in my scorp and they handle calculating all of the taxes. Because I run payroll, then I have money paid into my state and federal taxes for tax time at the end of the year. Costs like ~$43/month and well worth the money to save me time and the headache of figuring it out. They handle submitting all of the payments for you. The payroll people answered ALL of my questions I had about taxes. I would also recommend talking to other business owners and finding a good CPA that you get along with if you dont have one already.
I then can move money in/out of the business as needed tracking it as owner contributions/withdrawals. The salary income at the end of the year looks like a regular job on the tax return and then the business earnings and my money in/out of the business gets reconciled at the end of the year as business profit/retained earnings.


Are you sure you only pay $43? the online estimate I received for adp is $63 per month.

Look at googles for "s corp dentist"

casino187 said:   BradMajors said:   The simplest and most reliable way of getting this right is to see an accountant and have him set of payroll for you. There are lots of accountants who will do this for a very small fee. While doing so, he should be able to give you enough advice on how to reduce your taxes to pay the fee you will owe him.

I'll probably just do this, again. 1st cpa quit responding. 2nd charged way too much money and I found 4 errors in a couple of months. 3rd cpa just ignores me now, after we had a good initial meeting and plan. so now, I have to waste my time "interviewing" another one and hope he/she will do what they say. It's just frustrating


why all ur cpa's hate u and ignore u? u musta pooped in their urinal

awstick said:   Circular E - http://www.irs.gov/pub/irs-pdf/p15.pdf
File 940 yearly, 941 quarterly, and your W-2 and W-3. It's real easy and takes about 15 minutes a quarter and 30 minutes at year end and I do them without any software or payroll processor.




as awstick posted & then here are your Arcansas:

http://www.dfa.arkansas.gov/offices/incomeTax/withholding/Docume... -- look at page 6 ( Monthly Reports and Payment of Income Tax). Pay yourself thru QuickBooks with Enhanced Payroll & then by the 15th of the next month do an EFTPS payments. The enhanced payroll does all the necessary forms you need (940, 941 & I guess it will do the Arkansas state too.)

Also the Fed payroll taxes are paid by the the 15th of the next month. That's same as the state.

I hope that helps.

jetsfan92588 said:   Without disrespecting your CPA, there is no requirement that shareholders take a reasonable salary. It's only required when distributions occur. Your CPA also seems to imply in the first paragraph that all payments to shareholder-employees are treated as payroll and not distributions, while, in fact, a portion of the payments can be appropriately treated as distributions.
For tax purposes, S-Corp is "taxed" like a partnership. i.e. S-Corp does not pay taxes; ALL profits is deemed income to its owner(s) in the year earned -- REGARDLESS of whether it is distributed or not.

Under the right circumstances, it is better to be a C-Corp for benefit reason (e.g. medical insurance paid with pre-tax dollars). Has the OP discussed this with his CPA?

fat9wallet said:   Under the right circumstances, it is better to be a C-Corp for benefit reason (e.g. medical insurance paid with pre-tax dollars). Has the OP discussed this with his CPA?
These would be extremely rare circumstances unless one is willing to be essentially double-taxed.
Besides there's a way to pay for the mediacal insurance pre-tax with an S-corp - the premium is considered your income on W-2 but then is deducted on the 1040.

casino187 said:   BradMajors said:   The simplest and most reliable way of getting this right is to see an accountant and have him set of payroll for you. There are lots of accountants who will do this for a very small fee. While doing so, he should be able to give you enough advice on how to reduce your taxes to pay the fee you will owe him.

I'll probably just do this, again. 1st cpa quit responding. 2nd charged way too much money and I found 4 errors in a couple of months. 3rd cpa just ignores me now, after we had a good initial meeting and plan. so now, I have to waste my time "interviewing" another one and hope he/she will do what they say. It's just frustrating


Trend of CPAs quitting on you? Common denominator? Either that or they're all full of BS.

PS. I'm married to one. Florida.

nothingevertodo said:   S-Corp is pass-through, which means that profits from the business are passed along to the owner as ordinary income and taxed at their marginal tax bracket.

Your CPA should probably advise you on the following consideration....

"Because shareholder-employees receive both wages and profits from the S-Corporation, there is a strong temptation to pay a lower salary and a higher profit distribution. Wages are subject to FICA payroll taxes. The S-Corporation will pay the employer's share of FICA taxes (7.65%), and the employee will pay the other share of FICA taxes (also 7.65%). Between the S-Corporation and the shareholder, wages are subject to a combined 15.3% payroll tax, plus the shareholder's income tax rate. Profit distributions, however, are not subject to FICA payroll taxes; they are subject only to the shareholder's income tax rate. So all things considered, the shareholder-employee will have a strong preference to pay herself a minimal salary and thereby increase the profit distribution."


Indeed. However, IRS has come after shareholders-employees who paid too small of a salary. It needs to be "market based salary". What it is and how much you can stretch it, that's for your CPA to decide.

As far as payroll taxes, most CPAs provide the service to calculate it. Or if you use QuickBooks, you can purchase it from Intuit. Don't try to do it yourself. Well worth $20 a month.

Totally agree aleck. That's what I did -- specifically QuickBooks Online Plus w/ Payroll. Lucky that I got in on a 50% off promotion for 1 year back this past Winter. That may be overkill for your needs but checkout all the products they have.

SEP IRA?

What am I missing here.

I have an S-Corp and have handled all payroll and taxes for a single employee myself for several years now. I spend maybe a 15 minutes to a half hour every month doing the payroll and about an hour every 3 months with the quarterly tax filing/payments. I mail the federal 941 and electronically pay/file everything else for no cost.

Everything that I have read on the payroll services would not reduce any of that time for me, and I calculate the taxes every month based on an hourly wage.

This gets even simpler for someone who chooses to pay themself a flat salary as the numbers would only change when the law changes.

What am I missing that these payroll services could do for me?

.

Skipping 10 Messages...
Is there a list of S-Corp deductions or write-offs (which is the correct term)? Some friends mentioned these items:

Business Meals
Car Leases
Education
Supplies/ Office Equipment ( Laptop, IT equipment, Cell phone, Internet( used for business ))
Tax prep fees
Training( Conferences, Seminars, Workshops, Certifications)
Transportation/ GAS ( To meetings/ to customer site)
Travel Expenses ( Air, Rental Car, Bus, )



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014