Man has filed with state to be S Corp. He read it might be a tax help. It's a closed corp, he's the only shareholder and the only worker. As I understand, a s corp has toW-2 it's officeholders if they work. It is primarily a service job, no expenses. Does all the income have to be W-2, or can some of it come down as ordinary income? Now the MO part, what about unemployment? Does he have to pay unemployment on himself? What resources can I look at to find out?
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Until December or the
next income tax bill you do not have to draw all as W-2 income. This has become a problem for the IRS, and they can make adjustments, but taking all as income has never been the answer this far for the IRS. Now Barney's old tax bill that he did not submit in December 2007 did have a provision saying if you worked and got a W-2 from a S corp any further UTI reported on the K-1 would be subject to FICA. We will see this winter if that comes back.
You have to check with the state as far as UC. It is subject to UC at the federal level so if there is some exemption allowed in MO it would mean you would not get the state credit on the 941 and pay more to the federal. -
It's amazing that these people don't get professional tax advice before doing this. They have no clue they have to (1) file a corporate tax return, federal and state; (2) file and pay FICA/quarterly 941 reports as well as state income taxes/reports; (3) file and pay FUTA as well as quarterly state unemployment taxes/reports (in most cases); (4) file a report and pay an annual filing fee to the SCC; (5) have annual shareholder meetings and keep records; (6) keep separate bank accounts and records of assets, loans, and basis; (6) and PAY somebody to do all this for them! (And if they don't, they should.) In most cases, it does not save them a tax dime.Comment
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