payroll-related obligations
Managing employee tax and social security obligations is an important aspect of doing business in the United States. Our company helps you avoid errors and penalties by ensuring that all requirements are met accurately and in a timely manner. Trust us to handle your staffing obligations so you can focus on growing your business.
Free Consultation
We will contact you shortly
Get the service
We will contact you shortly
For corporation owners, especially those classified as officers or shareholders, the IRS requires the following payroll-related obligations:
Reasonable Compensation
If a corporation owner is actively involved in the company’s operations, the IRS mandates that they receive a "reasonable salary" or compensation. This applies particularly to S-Corporation owners who must pay themselves a reasonable salary if they perform substantial services for the business. The salary must reflect the value of the work performed.
Payroll Tax Withholding
Corporation owners who receive wages or salaries must follow the same tax withholding rules as any other employee. This includes withholding:
Federal income tax
Social Security and Medicare taxes (FICA)
Reporting and Filing Requirements
Corporation owners receiving a salary must ensure proper payroll tax filings, including:
- Form 941: Employer’s Quarterly Federal Tax Return
- Form W-2: Wage and Tax Statement (issued to the owner as an employee)
- Form W-3: Transmittal of Wage and Tax Statements
- Form 940: Employer’s Annual Federal Unemployment (FUTA) Tax Return
Employer Payroll Taxes
The corporation must pay the employer portion of Social Security and Medicare taxes (matching the amount withheld from the owner’s salary). Additionally, the corporation is responsible for paying federal unemployment taxes (FUTA) and, depending on the state, state unemployment taxes.
Payroll Tax Deposits
The corporation must deposit withheld taxes and employer taxes based on the IRS deposit schedule (monthly or semi-weekly), depending on the amount of tax liability.
Failure to comply with these payroll tax obligations, including paying the owner a reasonable salary, can result in penalties from the IRS, such as additional taxes and fines.
FREE QUICK CONSULTATION
Have a quick question? Benefit from a free consultation for up to 15 minutes.
MEET OUR TEAM
INDIVIDUAL CONSULTATIONS FROM PROFESSIONALS
Ready to start your company and take the first step to success?
Don't miss the opportunity to start your business now!
Don't miss the opportunity to start your business now!
20+ specialists
15+ years of experience
15+ years of experience
PAID consultation with CPA, Business Attorney or Tax AdvisoR
For more in-depth guidance, we offer paid consultations with a CPA, Business Attorney or Tax Advisor charged by the hour.
Accountants
Business Consultants
CPA
Business Attorneys
Tax Advisors
