S-Corp Payroll Enforcement by IRS
IRS is starting to enforce the fact that if you have an S Corp, you must take a salary and pay payroll taxes throughout the year. Many have been getting by with just cruising along with no payroll taxes paid during the year. At the end of the year, they file their taxes and do not have to pay payroll taxes on their SS-Corp income. It has always been a requirement that a “reasonable” salary must be taken each year for the owner and employees. Because many have not, payroll taxes have been avoided by the taxpayer and denied to the IRS. As a result, IRS has mandated that this stop. They are now requiring that if you have an S-Corp and you fail to take a “reasonable and customary salary”, they are going to deny the S-Corp status and charge payroll taxes on all the net income.
This is going to cause many to pay an enormous amount in payroll taxes (15.3%) on the net earnings. S-Corps were never meant to fail to pay the payroll taxes, only lower those taxes by declaring a reasonable salary and paying the payroll taxes on a monthly basis. Failure to do this is now going to result in heavy taxes having to be paid when you file your tax return.
There are many payroll services that can help with this procedure. We would be happy to review your case and assist you in finding the correct help you might need. Do not get caught at the end of the year and owe tons of taxes unnecessarily. Let us help you to keep what you can and only paid what is actually required.
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