If you are audited by the IRS, you could be liable for Social Security and Medicare taxes and withheld income tax if you do not deduct and withhold them because you treat an employee as a nonemployee. This would include yourself if you are a corporate officer.
You may also be liable for a trust fund recovery penalty. Here, “ Take 2 aspirin” — you may be heading for a BIG HEADACHE if you do this and the IRS finds you. And they do!
Because an officer of a corporation is generally an employee with wages subject to withholding taxes, as a corporate officer you may wonder what is considered “reasonable” compensation for the efforts you are contributing to the operation of your trade or business. Wages paid to you as an officer of a corporation should generally be commensurate with your duties.
The IRS defines “reasonable compensation” as the amount of money that would ordinarily be paid for like services by like organizations in like circumstances. It considers both the reasonableness of the total amount paid and the nature of the services being rendered.
The Good News . . . No More Headaches for Y-O-U
Distributor Tax Service can process your payroll, file and pay all payroll taxes, and issue W-2’s for you. You simply approve the payroll each week (this takes 60 seconds) and you are done! No waiting on your payroll tax reports to be prepared or scheduling tax payments. The gross wages and employer taxes are deducted when running the payroll so you don’t have to budget for them to be paid at a later date.
To learn more about this great service, please contact us at 205 621-1770 click the link below. This is available for DSD Insurance business clients.