A: According to the IRS, if you manage the business or work in it you MUST pay yourself W-2 wages.

  • S-Corps and LLC’s with S-Corp elections often offer great tax advantages and reduced liability to the owner, so make sure you are getting the most bang for your buck.
  • One of the quickest ways to ensure you are audited as an S-Corporation is to file a corporate tax return that does not reflect “Compensation of Officers.”
  • It is assumed by the IRS that no one works for free, and the IRS has said that officers of an S-Corporation must receive wages.
  • As an owner-employee of the S-Corporation, you must pay yourself a “reasonable amount” salary, and pay payroll taxes on your salary, according to the IRS.

S-Corp advantages of being on payroll through EmployShare:

    • You bear no administrative cost of participating in the cafeteria plan through EmployShare.
    • You are able to adopt EmployShare’s retirement plan (low administrative costs).
    • Your officers can participate in our multiple-employer cafeteria plan and flexible spending arrangements.
    • You pay no self employment tax.
    • EmployShare is responsible for all tax payments (no more filings needed).
  • The S-Corporation is often more appealing to the small business owner because it provides attractive tax advantages and still provides the owner with limited liability protection. With S-Corp taxation status, there is just one level of federal tax to pay and you eliminate being “double taxed.”
  • Learn more about the tax advantages and liability reduction gained from an S-Corp or LLC with S-Corp election though EmployShare.