Didn't issue payroll for your S Corp? Here's what to do.

Didn't issue payroll for your S Corp? Here's what to do. | Reasonable Compensation Workaround

Рет қаралды 54,290

Күн бұрын

What to do if your business is taxed as an S Corporation and you, as the owner of the S Corporation, didn’t pay yourself reasonable compensation. Can you issue a 1099 in lieu of a W-2 and running payroll? In this video I cover:
- Your 3 options if you didn’t issue payroll to yourself.
- For the 3rd option, which is the option I recommend, I’m going to actually show you how to execute it by sharing my screen and showing you the tax forms and how to complete them.
- I’ll also answer the question of, "Do you need to pay reasonable compensation if you didn’t take distributions?".
- I’ll also answer another common question which is, "Do you need to issue payroll if your business wasn’t profitable?".
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#reasonablecompensation #1099 #scorp

Пікірлер: 189

@LorinAshWilson Жыл бұрын

Thank you so much for this video! It is amazing how many accountants/CPA's do not inform their clients about the nuances of S-Corps. It's also amazing on how few readily available resources their are to go about fixing these things. You rock Navi! --- A fellow accountant/tax preparer/consultant - 2/4 of CPA done.

@NaviMarajCPA Жыл бұрын

Yes - I agree. There is a lot to learn that is not in the tax code, taught in school, on the CPA exam, etc. Currently it’s only learned through working at a firm with other tax professionals who have the experience. Hoping to change that one video at a time. 😉 Congrats on completing 2 parts of your exam.

@stacenone1405 4 ай бұрын

Thank you for that so much. Im a stay at home mom who is currently trying to understand all this a little better for my bookkeeping clients while I also study for EA and finish my accounting degree. Getting a full time job to work under someone at the moment to learn all these nuances would be impossible for me and sad for my kids. You have no idea how much these are helping me and answering so many questions that even my tax strategist tries to make confusing on purpose. Ill be signing up for your course soon, these videos are everything I need to be better, I cant imagine how much better the course is. Thank you!!!!@@NaviMarajCPA

@ckye736 3 ай бұрын

So critical information. We had the same issue as a S-corp. our inexperienced CPA didn’t file properly for years. Now I know what went wrong. Thank you so much, Navi.

@Isaac-qd6gy Жыл бұрын

One of the best videos I've seen on this topic, thank you for your wisdom!

@NaviMarajCPA Жыл бұрын

Wow, thank you for the comment! 😀

@ChristianCA620 Жыл бұрын

LOVED this video. My client is in this boat and this was a great refresher for me and things to consider! Would have loved for you to show what that did to the business owner taxes in comparison.

@caramelkizez 5 ай бұрын

Thanks for dropping valuable gems❤

@claritycoaching3385 Жыл бұрын

Thank you for this helpful video! Even though I'm using a CPA to manage this, I wanted to know my options and be informed about how it's being handled.

@evelynkieffer4586 Жыл бұрын

Yes, I would love to learn about determining reasonable compensation - Thank you for all of your wonderful content!!

@NaviMarajCPA Жыл бұрын

Shot that video and uploaded it yesterday, 01.26.23. Check it out!

@iamkristimoore Жыл бұрын

Thank you Navi! This was a very helpful and informative video!

@NaviMarajCPA Жыл бұрын

You’re welcome! Glad it was helpful. 👍🏼

@JoannaApplegate 11 ай бұрын

You’re awesome for this! Thank you!

@martavulpe4942 Жыл бұрын

Thank you so much! This just saved me as I figured last year I didn’t do payroll at all! And setting up with gusto for the next. But definitely using this to bypass all the hidden fees 🙌🏻😭👌❤️

@NaviMarajCPA Жыл бұрын

You’re welcome. Glad you found it helpful. 👍🏼

@alimahmud6926 Жыл бұрын

Thank God I’m not alone in this😅

@user-py7wp6nw9h 6 ай бұрын

love your videos. I couldn't issue payroll for myself from my S-corp because I did not make enough money to do so

@roberttack3346 5 ай бұрын

I am doing my own S corp taxes this year. I realized I also did not run payroll and had to do this work around. Great video! 😊I fixed it going forward by setting up payroll for myself. I find it challenging but very insightful.

@AJ-gz2hd 5 ай бұрын

What work around did you use and did you have any penalties? I’m in the same situation as a first year business owner. In the process of preparing my taxes and I’m so confused.

@patientlyquiet 4 ай бұрын

bump AJs question

@patientlyquiet 4 ай бұрын

@@AJ-gz2hd same :( did you ever figure out the payroll?

@AJ-gz2hd 4 ай бұрын

@@patientlyquiet not yet sadly:( I’m still trying to figure it out

@coralcabrera Жыл бұрын

This is a GREAT video, so informative. Thank you so much!

@NaviMarajCPA Жыл бұрын

You are so welcome!

@thespencerowen 5 ай бұрын

This explains exactly where I am at. Thanks for this video

@malakpsychology378 3 ай бұрын

I am going to need to watch this numerous times. Thank you so much! I wish I could hire you because my CPA didn't even remember that I had my own business. I am also needing to turn a 1099 part-time worker into a W2 employee. I am so lost and don't know how to find time to learn and figure this out. If you work with people in AZ, I would gladly hire you and/or I am open to referrals!

@ericalouie4548 Ай бұрын

Helpful, amazing, enlightening, amazing, thanks much!

@letsgoviral777 5 ай бұрын

Excellent! Thank you.

@sohailsyed2374 3 ай бұрын

Most the new clients I’ve seen coming to me been doing their Taxes with another preparer for years and never issued themselves a payroll. This can go back as 10 more years. I wonder how aggressively IRS target this situation. Thank you for the great video.

@GlobalMindsetUniversity 8 ай бұрын

MashaAllah ❤ This was awesome 💯

@rebeccawalsh1450 2 ай бұрын

Thank you so much! this was very helpful

@ew9373 7 ай бұрын

Navi, you're awesome.

@bnotyet3236 Жыл бұрын

Yup this is me: didn't do payroll and gots about 40K profit. Your video is spot-on to my situation. Gonna do a late 1099-NEC now. I've subscribed. Luv how you tend to actually reply to most questions. :)

@NaviMarajCPA Жыл бұрын

Thanks for the sub! Responding to the questions is pretty much impossible but I try to help when I can. Appreciate you observing that though. 👍🏼

@ExquisiteBossin 9 ай бұрын

Did you 1099 your full $40k profit to yourself?

@bnotyet3236 9 ай бұрын

@@ExquisiteBossin Not sure what ur asking ... I followed Navi's example in the video. I used TaxAct software for the return and eFile4biz to generate 1099's. The 40K profit was split 25K salary and 15K dividends. IRS accepted the return without issue ...at least not yet :)

@andrewpfluger9642 5 ай бұрын

@@bnotyet3236 were you able to add the note at the top of the 1120S about the late S-Corp election?

@bnotyet3236 5 ай бұрын

@@andrewpfluger9642 My s-corp election wasn't late ... never said it was. Not doing timely payroll is a very different thing ...

@therjfirm Жыл бұрын

Yes, please make a video about what reasonable compensation is or add it to the course as a new lesson.

@NaviMarajCPA Жыл бұрын

How Much To Pay Yourself | Reasonable Compensation Myths kzfaq.info/get/bejne/btZ0d5B139CqZIU.html

@andrewbahlman7768 Жыл бұрын

Great video! Do you have videos on how to register with EDD unemployment and dept of revenue? I am unable to set up payroll without these registration numbers and I am not sure how to complete those applications

@alishasapproach 4 ай бұрын

Thank you so much for this info!! Dealing with the same thing. I did a w2 instead of a 1099 - is this fine for this situation?

@diliaperez5663 4 ай бұрын

Please do the reasonable compensation video. Thank you for your work

@pinklauriesue9292 Жыл бұрын

Hi...I really enjoyed this video. I learned a lot and things started to "click" (I've been watching a lot of videos!) I have a question... I am helping someone with their taxes...They haven't filed taxes in several years...Their previous tax preparer made them a corporation and then an S-corp. The only problem is that they did not make sure this truck driver understood the rules and requirements for being an S-corp, much less stress the importance of making sure that he follow "the rules" for filing as an S-corp (ie. payroll, w-2s, reasonable compensation, complete separation of personal and business expenses...). I was thinking that I would use this workaround with the 1099-NEC for the current and previous taxes that need to be filed...and send them in all at the same time (as a big group/ batch, ...you know?). I was also thinking that I could write a note to the IRS explaining that He was setting up the proper system for payroll and would begin implementation...A.S.A.P ... But how do you suggest I handle the unemployment taxes and other things that you mentioned had not been paid through the workaround? I want to make it right with the IRS and the State agency by covering all the taxes owed in someway or another. I hope I was able to explain that in a way that makes sense... Thank you for your time. I really enjoy your content.

@rchsuccesspartnersllc155 6 ай бұрын

Thank you. Quick Question. If I took distributions, can I go back and re-build the accountable plan to Debit the expense accounts and credit the owner's distrib account used to book the distribution?

@khaledkassem8913 Жыл бұрын

Great Video what if the Corp didn’t make any profit do I still have issue w-2 form or 1099-nec to my self it is only can make more losses

@ianaishchuk7146 4 ай бұрын

Thank you for the video. What would we show in shedule K - QBI for 1099s (if anything)? Taxact put it to W-2 wages, but that's wrong

@danielscott1409 Жыл бұрын

This is Fantastic, thanks Navi! Question: if I leave all the money in the company, then next year I pay a salary and distributions, then next year I'll have salary income on my personal return and a salary expense on the S corp return. If the s corp has no revenue next year but will have the salary expense, will I be able to take a loss from the s corp onto my personal return to offset the salary income on my personal return? Otherwise I'd be paying tax on that income twice: once in the year the s corp earned it and once in the year the salary was paid.

@JazzSa 21 күн бұрын

Thank you for the video, it clarified a lot for me. I was never advised by my accountant about payroll. Now I have another question regarding the Solo 401k. Since I did not do W2 for 2023 how can I claim the employer portion that I already paid into Fidelity for 2023 at the end of the year. If I cannot claim what are the consequences for overpaying? Thank you so much.

@rosieluxure2195 8 ай бұрын

Excellent video! Thank you for your thorough explanation on this topic. I have been doing my husbands s corp taxes for several years and just when I thought I had mastered the craft, a unique situation presented itself… he opened a new business with partner, elected S corp, and took a loss their first year in business of 60k. (Real estate) this past year was their 2nd year in business and they showed a rather large profit. They hired a book keeper that didn’t really guide them in any direction and they had no idea their profits were so large and hadn’t established payroll for themselves yet. Each shareholder is showing 225k on their K1 as ordinary income. Ouch!!! They didn’t take any distributions and kept that money in the business (rather used it to purchase more land to sell etc) our AGI reflecting on 1040 is now through the roof! Would this “work around” be a good idea for us? Thank you!!!

@AudreyJames 3 ай бұрын

this information was very helpful. How do I show the distribution income on personal taxes? Also since we're showing income via 1099-nec, do I only file as a sole-prop on personal taxes or still use the s corp's information as my business entity?

@calimcclung3499 4 ай бұрын

We were running in the red most of the year. So never got around to paying the office/owner. We use ADP and in January I was able to issue a retroactive W2. But the amount was too low for reasonable compensation. Does it make sense to issue a corrected W2? Or is the 1099 nec still your preference? This is a new S-corp and the officer is now on payroll for 2024.

@mikecochran1759 Жыл бұрын

bro... If I would have done any of this research that I am doing now before I started my company I would have NEVER !!! started my company. The tax system in the US is a convoluted joke. You are taxed up, down, left, right and at every angle x3 I never ever want to hear about cities, states, or the fed crying about they have no money. Starting my company was the worst thing I have ever done. I would recommend that schools make your videos mandatory to watch before they are allowed to graduate.

@truckingwithcliff 5 ай бұрын

I use gusto to run my payroll they pay all the taxes quarterly for me. I'm a single truck owner operator

@user-mf4gz3sp1q 5 ай бұрын

...tell us you're doing it wrong without telling us...

@truckingwithcliff 5 ай бұрын

@user-mf4gz3sp1q so dodging tax liability is the right way? I enjoy my freedom therfore evading taxes isn't on my agenda.

@thuy-tienle860 Жыл бұрын

Navi, thanks for the video. If an LLC taxed as an S corp is not making any money, not making distribution or paying payrolls to its officers, does it still have to file a quarterly 941? Thank you.

@IgorDutchyn Жыл бұрын

Would it make more sense to pay myself from C corp through my s corp? Like let's say that I don't want to get myself into high tax bracket and want to keep money in my c corp for future business investments and have the benefits of S corporation at the same time and I'm not not sure how to keep money in S corporation at the same time plus I don't want business property sale gain tax to pass on my personal tax and raising my total income. What should I do? As I've been self employed as S corp for a while and starting to grow my business now.

@dgreen617 Жыл бұрын

Thank you - this was good information. I have a slightly different scenario I have a question on. I am filing a late s-corp election for THIS year 2023 but have not put myself on the payroll yet, planning on starting with next week's payroll run. I have taken some distributions in past couple of months. Do I need to issue a 1099 for the partial year distributions, before payroll? Or, if I am paying a reasonable compensation for the remainder of the year, can those prior distributions just be marked as such at the end of the year?

@tyreechaplin8630 Жыл бұрын

I am in the same boat!

@SqueaksUofA 6 ай бұрын

Quick question, why would a late 1099 be preferred in this situation over a simple Backpay to cover reasonable compensation from years past?

@manuvns 11 ай бұрын

When should i begin my payroll/ begin paying myself if my customer is paying me net 45 from invoice date ?

@Loretta-uc1vh 5 ай бұрын

Wow ... who knew? Totally get the work around ... hadn't occurred to me.👏

@marketbuy Жыл бұрын

My friend’s licensed tax preparer said she does not do payroll for her clients who are SCorp. She said she was never audited by the IRS. I thought that was weird to hear because the purpose of being SCorp is to make payroll and save money on taxes.

@NaviMarajCPA Жыл бұрын

Your friend’s licensed tax preparer may not be licensed much longer. 😂

@tfergieman Жыл бұрын

Hello! I’m dealing with this issue currently (did not run payroll). My other issue is that I was issued a 1099-NEC from another company, in which I had not changed my direct deposit over from my personal account (I’ve since changed this of course) but all of my 2022 direct deposits were sent directly into my personal account. How to I rectify this retroactively? Thanks!

@millyalvayero2900 Жыл бұрын

What about when a company is fairly new and can’t afford to pay an officer ? Is it okay under these circumstances to not take a salary?

@dayalexa9383 10 ай бұрын

What happens if I always in my taxes show like I took all the profits but never did stay in the account what should I do? Where can I get the course?

@goodbye2yooh 5 ай бұрын

Hi Navi! I'm new to your channel. My husband and I started an LLC and filed for S Corp election. We were approved for the S Corp election by the IRS. We just started our business and are not profiting much each month. Are we still required to pay ourselves payroll although we just started making a profit? Or will we be required to withdraw money when we file our taxes?

@oloera10708 Жыл бұрын

How would you handle a new retroactive S-Corp election when there was no payroll run prior to the s-corp election?

@tekstyle38 3 ай бұрын

is there a reason why taking the 199a deduction is a bad idea with this work around? and also how is the payroll taxes reflected and accounted for when we do this 1099-NEC alternative to proper payroll?

@IrinaAnthony 11 күн бұрын

If you start mid year, can you do both, 1099NEC first half of the year and W-2 for the other half?

@januaryjones8804 5 ай бұрын

I am a realtor and was issued a 1099-NEC for my S-Corp, but I failed to get on payroll in 2023. Will issuing the 1099-NEC to myself work for me, so it reduces my personal tax return tax liability? Then show distribution on Schedule M-2?

@AmorFatiMoto 8 ай бұрын

What if your company is still a start up and you haven't taken a pay check or taken a distributions because you are still building the company?

@rika8807 5 ай бұрын

Hello! I know it's 2024, but in this situation. However, I did the owner draw biweekly for self pay under LLC sole prop. I realized my gross income is >100,000 and I am filing S Corp entity for 2023 after looking at my income. So, what so I do??? Because I did draw money for income biweekly. Thank you in advance

@victorparraga1693 Жыл бұрын

This is great information for sure! I elected my father’s LLC to S-Corp status two weeks ago and have been setting up payroll so these videos have been beyond helpful. By any chance, what advice would you give to someone who’s beginning their journey on taking the CPA?(if any). Side note: I’ve been out of school for two years but have been working in tax for four and been putting off studying for a bit since the busy seasons are pretty demanding. Thank you!

@NaviMarajCPA Жыл бұрын

Thanks for the feedback. My I ask…what is your reasoning for obtaining a CPA license? Depending on what your goals are, it may not even be necessary.

@victorparraga1693 Жыл бұрын

@@NaviMarajCPA I started my tax career in public accounting and now work for a law firm doing the same tax compliance work. Eventually, I would like to build and grow my own tax and accounting firm. I just feel that having the CPA would help solidify my knowledge but also look more attractive to potential clients. I think the latter is particularly a big driver for me pursuing the license since the market I'm in (New York City) is competitive.

@NaviMarajCPA Жыл бұрын

@victorparrage1693 Ok, it sounds like you're trying to obtain it for the right reasons. I asked because I wanted to point out that if your ultimate goal is to make a certain dollar amount per year, etc., that a CPA license is not necessary. There are plenty examples of EAs or even taxpreparers without any special designation that are very "successful". Having said that, accounting is my 2nd career. I originally earned a bachelors degree in Business Management, spent 10 years in the banking industry, then went back to school to obtain my Masters in Accountancy. I'm leaving out a bunch of steps and life events but, trust me, you'll have no problem with the exam. I'm not a wizard and I passed all 4 parts on my first attempt. My advice would be to set a goal for taking each section and stick to it. Start with FAR. In fact, do me a favor and shoot me an email when you've ordered your prep, started studying and scheduled your 1st exam. You've got this.

@rathegod4971 3 ай бұрын

How does this work in conjunction with your retirement accounts?

@aquiet30early 11 ай бұрын

Helpful video! Do you have an videos on the following: IRS issued SCORP status mid year (let’s say June 2023), effective from Jan 2023. So from Jan to June you paid yourself via distributions (since you didn’t know if your SCORP election would be approved). From July or August to Dec you pay yourself via payroll. How are you penalized or what should be done in this scenario?

@teamjoniga2120 8 ай бұрын

same boat. What did u end up doing?

@jp7g229 2 ай бұрын

How a about i have not received approval letter for s corp(2553) from irs. And then get the letter in late of the tax year or even at the end. Some suggested start payroll as soon as you submit the form 2553, some said need to wait for approval letter first...and even their accountants need to see the approval letter before starting it. Also, when you receive the approval at the end of the year. And you follow others not to start payroll until then. So can we start payroll as soon as we get the approvals and make bigger payments to cover the previous quarters?

@enriquejustiniani2472 4 ай бұрын

Hi, what would you do with an ITIN Shareholder if they're not supposed to put themselves on payroll (W2)? Technically if an individual ITIN holder who is a US resident can be an S Corp shareholder, so what would be the right way for this person to pay themselves? 1099NEC them every time? Only distributions? Do all shareholders have to be on salary? I can't seem to find an answer to this.

@stevebutter3k 5 ай бұрын

What happens if I have an S corp and the only income was from capital gains but I didn't pay myself a salary or distributions. How does that work? And can I still deduct the expenses from the purchase of the car for the business using section179?

@jhoniikemp 5 ай бұрын

Since the income will be reported on the 1099-NEC do we still generate K1s?

@teamjoniga2120 8 ай бұрын

changed from LLC to Scorp midyear, Can I set up the payroll late? And file as normal s corp?

@dayalexa9383 10 ай бұрын

If the s corp has a owner that have itin number he will always get a 1099 then file form 941 or 940?

@ExquisiteBossin 9 ай бұрын

Hello Navi- In my scenario my business also has other I.C. it distributes 1099 out too. Would I be okay doing it in such a case where I don't elect for distributions to the business. But rather if the business say makes 100k- and I 1099 $70k of that. Can I use the $30k balance to 1099 myself as a solo s Corp owner.

@mekymoney 3 ай бұрын

As follows CPA, this is a great fix, but it wouldn't report the income to the shareholder as wages. This will probably trigger an Audit since the corporation didn't file any payroll reports. The officer compensation flows on the K1. Probably, add it under professional services or other deductions. Thanks!

@blinktransport4903 5 ай бұрын

Hi, I got elected as S corp in September 2023 to be taxed as S corp for 2023 . I didn’t know that I have to do payroll and now we are in January. So should I just issue a 1099 for my self for 2023 and Pay payroll taxes or what should I do? Much appreciate your advice.

@asimrehman6036 3 ай бұрын

So same situation here. As a S Corp didn't run any payroll but took distributions. Married filing jointly and my spouse does have W2 wages to report. Is that ok or do you still recommend the 1099 workaround.

@Carmaniabanania 5 ай бұрын

What if I ran payroll for too low. So I have a w-2 for 1750.00 but I had 7000 in profits as it came in at the very end?? I didn't know that I would get a last minute gig so I didn't run payroll. Do these small amounts matter?

@shoaibahmed81 Жыл бұрын

you don't take QBI deduction on your individual return because you already took that on 1120s? is that correct. Great video by the way

@Phree_Muzik 7 күн бұрын

So are you saying if we didnt pay the owner or the employees or everyone

@JC-slammedaf 4 ай бұрын

Hey, great vid, i have a question I have searched the entire internet and there is nothing talked about it, hopefully you might be able to 🤞 I have an llc taxed as s corp, me and my partner are the only two shareholders. She is the only shareholder-employee of the llc, i do nothing and therefore im not an employee . Since, im not an employee i do not have to have a reasonable salary, but as a shareholder how can i pay myself my share percentage of ownership ? Lets say shes 70% and im 30% owners, how do i pull out my 30% of available profit( distribution)when im not an employee? Do i simply take out a distribution? I have not found a single video about how non employee shareholders pay themselves maybe this would be a great video idea. Thanks 🙏

@user-cq1jb6uc9e 4 ай бұрын

Small company, in 2020 was the last year I took a pay check. Being on social security I just started liveing on that. I didn't know I had to pay my self. So now I'm 3 years , how can I get this fixed

@ExquisiteBossin Жыл бұрын

Hello- I was almost with you throughout, however I don't understand where the 60,000 of distribution income goes to on the 1040 for the solo s corp owner. Is it combined to add with the 40,000 or is there a separate line to add the 60,000 onto the schedule c

@NaviMarajCPA Жыл бұрын

The 1120S will spit out a form called a K-1 that will show the $60,000. The information on the K-1 will then be used to enter on the 1040.

@ZSees444 3 ай бұрын

What happens if as an SCorp, both shareholders have loaned the company a lot of money and draws are being made to pay back on that loan? Is that loan repayment amount to be placed on a 1099NEC? I know what is taxed is the interest rate only.

@user-mb6wy2mn8m 5 ай бұрын

well what is reasonable compensation is ? percentage or number wise?

@aidadavalos1045 Жыл бұрын

Navi, thank you for this great resource. I just want to clarify with an example. If my business made $6k in profit and I didn't take any distributions then I don't need to worry about filing a 1099-NEC? Also, as you can see my profit is so little that I want to revoke my S-Corp in 2023. Any additional requirements for 2023? Meaning, do I need to still file a form 1120-S for 2023 even if I revoke the S Corp status? and do I need to pay payroll? Thank you in advance for your help!

@NaviMarajCPA Жыл бұрын

Correct, no 1099-NEC for 2022. Here is a great resource for revoking S Corp election: www.llcuniversity.com/irs/llc-revoke-s-corp-election/

@om9927 3 ай бұрын

single member s corp- do i file form 940 and 941 indicating the 1099-NEC amount used for this workaround?

@jamesdean5677 3 ай бұрын

I went to do a 1099-Misc cause this happened to me and it looks like I have to send a 1096 too. What is that? Thx.

@leef.4242 5 ай бұрын

What is the income tax form for an LLC taxed as a C Corp?

@valerienewton6581 3 ай бұрын

I have an S Corp and I am my only employee. I started this in 2019 and did nothing with the business as I started it as a side business. Starting this month (2 weeks ago) I am now a contractor for my former employer but they will be paying my business and I will be paying myself through my business. Do you think it's the best option for me to do to sign up with a payroll company like Gusto or ADP? They can run payroll (through the software) issue me paystubs and a W-2 at the end of the year to file my 1040. At least my withholdings would be paid throughout the year (through Gusto or ADP) and I would pay my quartley medicare/social security for my business through the EFTPS system which I already set up. This is the better option correct, relating to using GUsto or ADP for myself as an employee? (I live and operate in Florida so I only have state unemployment taxes to pay, FL does not have corporate income tax). Thank you!

@ShawnValesStudio 2 ай бұрын

Do i have to issue payroll if my business recorded a loss for the entire first year of business? Im struggling to understand how to pay myself a salary if I actually lost money, even before deductions.

@ParagPandit Жыл бұрын

Navi, I made SCorp election and paid myself as an employee. WA state rejected my SUI quarterly report telling not to pay SUI or include member of LLC in the quarterly report. After that I started the process to get back SUI, PFML, Workers Comp. refunds. Will I still be good with IRS w.r.t. my SCorp status?

@NaviMarajCPA Жыл бұрын

Yea, you should be. You’ll still have to pay FUTA (federal unemployment tax) so just keep that in mind.

@777jazz777able 9 ай бұрын

Hello, can a s corp owner be on payroll with a itin?

@megan8494 5 ай бұрын

What if we payed ourselves the reasonable salary (transaction history from business to personal accoun) just not through payroll?

@jemimacoop2726 Жыл бұрын

OMG I messed up bad. I have a small single.member LLC and mistakenly elected.as an S Corp but was intending to be a disregarded entity and I also have a full time job. I made around 12k net income and no payroll, just distributions(bank withdrawals). Help!

@juanaallen5885 5 ай бұрын

What about if your tax preparer created a C-Corp for you and you didn’t know. It was a partnership LLC and just file taxes with a schedule C. This was a LLC where the spouses were the partners.

@ZarghoonPana Жыл бұрын

what if my S Corp was in loss last year? Do I still need to pay myself? I didn't run a payroll to myself

@ChadOAllen Жыл бұрын

when you state pay yourself in the context of being an s-corp you mean as the owner you are a w2 employee of the s-corp correct? If taking withdraws that are separate from the w2 salary it is taken as 1099-nec from the company correct?

@NaviMarajCPA Жыл бұрын

In this particular video, yes, I am saying "yourself" is the officer/owner/shareholder of the S Corporation. Your compensation should be paid via payroll and on a W-2. This video discusses a temporary workaround. The distributions can be taken in many ways such as a check, online banking transfer, etc. You would not issue yourself a 1099-NEC for the distributions (even when using this workaround). I created a video called How to Pay Yourself with an LLC. Watch that video - it covers this for S Corporations as well.

@suzieheng3953 Жыл бұрын

Please help make a video for this particular case, and if he makes a solo 401k contribution for himself, that would be helpful. Where would he deduct the contribution?

@scentilatingone2148 7 ай бұрын

Dont you still pay the self employment taxes on the 1099 income? It doesnt save any taxes.

@CH-mp8eu 3 ай бұрын

OK. So I have a couple of questions. 1) Why eliminate all QBI if one does this method? It seems that "income" from the 1099 would not qualify as QBI because it would have been "amounts received as reasonable compensation" or "W-2 income" if the filer had properly done payroll and claimed their salary as compensation or wages. So for sure the amount reported on the 1099 on the individual income should not get a QBI deduction. However, the amount taken as profit from the distribution on the K-1 should fall under the definition of QBI (if one meets all other requirements to qualify). Correct? 2) What is your position on claiming the payroll tax deduction on line 12 of the 1120S? The filer didn't pay the payroll tax in the form of "payroll" throughout the tax year, but essentially did the same thing when paying both the employer and employee portions of the tax when filing the 1099, correct? So it seems the filer would be entitled to this deduction on the 1120?

@farooq23 Жыл бұрын

Thanks for sharing your knowledge. Shall the owner issue himself W2 or 1099. i shown myself as a employee of my corporation and take W2 paycheck. Aiming 40% W2 and 60% K!

@NaviMarajCPA Жыл бұрын

Owner is supposed to be on payroll and issued a W-2. This video is covering a temporary work around by issuing a 1099 in lieu of the W2. You can look at my video about reasonable compensation to learn more about how much you should pay yourself.

@sofiazapata5556 Жыл бұрын

What happen with the 60k distribution, the s-corp will issue a k-1?, so the owner will have a 1099-nec and a k-1 as well?

@NaviMarajCPA Жыл бұрын

That’s exactly what will happen. 👍🏼

@Jay-K-db9io Жыл бұрын

Won't the IRS reclassify all 1099 payments made to S Corp owners as W-2 wages? and at the time of discovery will have to pay late filing and late payment penalties?

@NaviMarajCPA Жыл бұрын

This is a workaround and the idea is to get on payroll and do things properly immediately after.

@thepujats6889 Жыл бұрын

Navi, Thank you very much for the great video! Can I ask a quick Q? I made the S Corp Election on my LLC last year, and my business operated with a loss for 2022. I did pay some personal expenses with business funds simply because it seemed unreasonable and financially a silly decision to set up a payroll service as we would end up losing more money. The numbers are super small - 10k income, 12k expenses and 3k is personal expenses recorded as owner's pay & personal bills in Quickbooks. I guess that means I took a 3k distribution, but really - would IRS go after me for such small numbers plus seeing my business operated with a loss?? Also, do you have any content on S corp election revocation? Thinking of ticking the box in 1120S because it doesn't make sense for my LLC to be an S corp if it can't afford it. I do realize that I would not be able to re-elect for 5 years.

@teamjoniga2120 8 ай бұрын

May I ask what did u do? I’m on the same boat.

@kellyborek1 2 ай бұрын

Did you ever get an answer for this? What did you do? I would also like to revoke it as it is more trouble than it’s worth with the profits we are now making since originally electing it, have taken a big nosedive due to change in circumstances. But not sure how to get out of it now agh

@WalkingSwole Жыл бұрын

I think you should have clarified or at least alluded that even if you don't take a distribution (or pay yourself) your corporations profits will still pass through to your personal tax return and will be taxed. I think some folks may think that taking or not taking a distribution is what equates to taxes....and that is not the case...my CPA had to correct me on this as well..I used to think if I just don't take a distribution (i.e. leave the money in the business) I wont pay taxes on it until its actually distributed.

@NaviMarajCPA Жыл бұрын

I understand. It's challenging trying to cover things outside of the main topic of the video. Seems like you now understand the concept of a pass through entity but for anyone reading this comment who wants to better understand this, I created a video called "How S Corp Taxes Work" which can be found here: kzfaq.info/get/bejne/eKeYdNqSpre7d6s.html

@venkatramachandran2912 9 ай бұрын

Navi, Here is the thing...Until December 31 2021, I was owning Partnership. Sent a form 2553 and became S corp effective Jan 1 2022. CPA forgot about the change and forgot to advice me to issue salary or 1099. I had a heart attack and went through bypass. So, for 7 months, didn't focus much on accounting aspect. Hence, CPA filed 2022 tax return income gained through partnership in 1040. IRS sent a mail in June 2023 that I should file s-corp and not partnership. CPA asked me to request for S-corp revocation effective Jan 1 2022. IRS said they cannot do more than 75 days. Now, I have to file s-corp tax return and amend 1040 return. The only issue I feel is that I didnt pay salary for myself. Whats your advice?

@Fetch94 7 ай бұрын

Probably need to contact his company directly

@ElliotShoener Жыл бұрын

Great video. Question? What do you feel is a reasonable salary for a real estate agent. Let just suppose an agent made 1M net profit. I've seen 25%-40% as recommendation based on net. However, lets say the market is not as great the next year and you only do $400K. The question, is it reasonable for your salary to change up and down based on sales. I feel like a more consistent salary of $120K a year (10K a month) is more reasonable as a yearly salary so regardless of the up or down swings, the salary stays consistent. Also salary seem to be something that should be even over the months. If income is distributed as 10/40/40/10 via the year it can be hard know what 25% or 40% of net is as net is not realized. I guess I am having issues with coming up with a reasonable salary in real estate as it is a moving target and your really don't know your year until late Q3 or Q4

@NaviMarajCPA Жыл бұрын

Someone like yourself could benefit a lot from a reasonable compensation consult to help you determine it. Here is a video on the topic: How Much To Pay Yourself | Reasonable Compensation Myths kzfaq.info/get/bejne/btZ0d5B139CqZIU.html

@casillashouse1 10 ай бұрын

Great content. My wife is a dentist and she will receive 1099s from the 2 dental offices she works at. She is also a S - Corp for tax year 2023 and has not taken any reasonable compensation via payroll thus far. Should she keep doing this throughout 2023 based on the fact that she will be getting 2 1099s anyways? Or is there something else she may be doing to avoid being assessed a penalty by the IRS?

@calvinlipscomb3652 5 ай бұрын

You need to pay a tax consultant. You have major problems brewing.