SCORP Dilemma

[alexranc]

Hey guys,

Hope everyone is doing great :cool:

I got a dilemma and was wondering if any of you tax gurus could help me out.

I currently have an SCORP with me being the only employee. I started the SCORP in April and I have been filing my quarterly 941 forms. This includes sending the IRS a check for the quarterly payroll taxes . Since I am the only employee and my company is making around $60,000 I have been paying myself a salary of $30,000 which comes down to around $7,500 a quarter before I remove taxes.

Here is where things get good…. recently, one of my bigger clients has decided to hire me as a full time employee. This means that over 75% of the money that I am making is now going to be paid to me and not my business, and the taxes for this are going to be automatically deducted off every single paycheck. My business still has other clients and it will still be making money, but it will be no where near $60,000. If am lucky I will be able to make $15,000 from the business which will be enough to cover business expenses not including the salary. I can therefore no longer pay myself a salary. Below are my questions…

1) Can I still have my SCORP and not pay myself a salary?
Do I still need to file a 941 even though my new employer will be filing W2s under my name?

Any tips and suggestions are appreciated :)

[JC]

Hey guys,

Hope everyone is doing great :cool:

I got a dilemma and was wondering if any of you tax gurus could help me out.

I currently have an SCORP with me being the only employee. I started the SCORP in April and I have been filing my quarterly 941 forms. This includes sending the IRS a check for the quarterly payroll taxes . Since I am the only employee and my company is making around $60,000 I have been paying myself a salary of $30,000 which comes down to around $7,500 a quarter before I remove taxes.

Here is where things get good…. recently, one of my bigger clients has decided to hire me as a full time employee. This means that over 75% of the money that I am making is now going to be paid to me and not my business, and the taxes for this are going to be automatically deducted off every single paycheck. My business still has other clients and it will still be making money, but it will be no where near $60,000. If am lucky I will be able to make $15,000 from the business which will be enough to cover business expenses not including the salary. I can therefore no longer pay myself a salary. Below are my questions…

1) Can I still have my SCORP and not pay myself a salary?
Do I still need to file a 941 even though my new employer will be filing W2s under my name?

Any tips and suggestions are appreciated :)

As far as the 941 question, I'm pretty sure you have to continue to file them. I live in Michigan and had employees in the summer but won't again until the spring and I still have to file them. As far as state goes, I can simply go online and fill out zero money owed for every month until I plan to hire again. And with Federal I'll just send the quarterly with a zero amount. Hope this helps

[Freelancier]

The 941 is not about you, it's about your business and its employees and the salaries and payroll taxes for those employees. So yes you'll need to keep paying it as long as you are an employee of the corporation.

You'll want to talk with an accountant about what to do next. You might have to "fire yourself" so that your S-corp has no employees and can then stop filing quarterly payroll reports with the Feds and state (and maybe even city). But then you have to have a way to be a contractor or something to the corporation and pay your own estimated taxes that way.

[tallen]

If your S-Corp is making a profit, and you are working in it, the IRS will expect the corporation to pay you a reasonable wage (on which payroll taxes will be due) before you take any money as a dividend. If the Corporation is just breaking even, then it doesn't necessarily need to pay you any wage. The Corporation will still need to file its 941 returns, even if the amount due is Zero, unless it is a seasonal business, in which case there is a box on the form that you need to check so that the IRS knows not to expect a 941 every quarter. Your state rules may be different.

If your corporation has paid you any wages at all over the year, it will have to submit a W-2 for those wages (sending you a copy).