Does anyone issue Payroll to owners of Single Member LLCs and withhold taxes?

[LCP]

If it has been done have you ever seen it get reversed during an audit?

Have you ever attempted to amend payroll tax returns to remove someone who should not have been an employee?

[Safire]

No but I wish I could. It would be alot easier for some single member LLC owners to come up with monthly payroll tax than to save up for their ES payments.

[KJ Judd]

I haven't either, but I have had some elect to be taxed as an S corporation so we could do the payroll withholding. (Plus avoid the SE tax on his health insurance premiums).

[taxmandan]

S-Corp and health insurance

I haven't either, but I have had some elect to be taxed as an S corporation so we could do the payroll withholding. (Plus avoid the SE tax on his health insurance premiums).

Uhmm, if he is a more than 2% owner of an S-Corp. any health insurance premiums paid by the company must be included in taxable wages on the W-2. He can deduct the premiums as a self-employed on the front of his personal 1040, but the payments are subject to FICA. check TTB, 19-12 for details on fringe benefits for shareholders.

[KJ Judd]

Correct, health insurance premiums go in Box 1 of Form W-2, but not box 3 & 5 because they are NOT subject to Social Security or Medicare tax. See Circular E. The shareholder gets SE health deduction on page 1 of Form 1040.

[taxmandan]

Payroll

Of course you are correct, I gotta quit posting before my third cup of java on the 8th work day of the week!

[OldJack]

Taxmandan you were probably thinking about other fringe benefits that are subject to payroll taxes such as the auto benefit.

[Safire]

And maybe life insurance, which IS subject to FICA for more than 2% shareholder.

Too many rules, too little brain to hold them all. ( talking about my brain, not slamming anyone esles brain )

[Bees Knees]

I disagree about payroll being easier than estimates. Writing out four checks a year is toooo hard? You would rather do four 941s, a 940, a W-2, a W-3, and a gob of state payroll tax returns?

[Safire]

Bees Knees, I was referring to a person coming up with a 4 large sums of money a year versus much smaller monthly sums. I wasn't talking about the work involved with filing the paperwork.

[Bees Knees]

Tell them to open a savings account for their payroll deposits. You will help them with the amount they need to pay each week when they take a draw out of the business for personal expenses. Then, once the quarterly estimate is due, they can use the money from the savings account to pay their taxes.

They might learn to be more responsible with their money. It might help them to learn how to save for other stuff too, insteading taking out credit each time they need to buy something.

[oceanlovin'ea]

Had similar situation

A few years ago as I was starting my business, the first bookkeeping account I got was a small restaurant that was a Schedule C. A Chinese man hired me to take over the bookkeeping because he didn't care for his present accountant. He told me he was helping his stepson get the business started and at a predetermined date he would step back and let them start running the company.

The first bookkeeper had put step son on payroll along with a couple of waitresses. When step son started running the business, I told him he needed to get EIN in his name and so we did that. But we found out that the old EIN was in the stepson's name and so the payroll that had been issued to him was not allowed since he was a sole proprietor.

I went back and changed the payroll records to show wife as the one who received the payroll checks. Issued corrected W-2 and corrected with state unemployment.

I don't know if this was the correct way to handle this but they never received any letters from IRS,SSA or the state.

Lesson from this is when I get a new account, I require them to show me documentation of the business name and EIN and how they are being taxed.

Linda F

[Black Bart]

Duplicate EINs

A few years ago as I was starting my business, the first bookkeeping account I got was a small restaurant that was a Schedule C. A Chinese man hired me to take over the bookkeeping because he didn't care for his present accountant. He told me he was helping his stepson get the business started and at a predetermined date he would step back and let them start running the company.

The first bookkeeper had put step son on payroll along with a couple of waitresses. When step son started running the business, I told him he needed to get EIN in his name and so we did that. But we found out that the old EIN was in the stepson's name and so the payroll that had been issued to him was not allowed since he was a sole proprietor.

I went back and changed the payroll records to show wife as the one who received the payroll checks. Issued corrected W-2 and corrected with state unemployment.

I don't know if this was the correct way to handle this but they never received any letters from IRS,SSA or the state.

Lesson from this is when I get a new account, I require them to show me documentation of the business name and EIN and how they are being taxed.

Linda F

Actually, as a practical matter, you can put the owner on a "C" and it'll sail right on through--I've done it. They aren't scrutinizing these things with a magnifying glass; they're processing bulk and volume. If the math's right, it won't pop up any red flags--you won't get any letters about that sort of thing from any tax agency (noboby's minding the store on this issue). Tax result for SS is about the same either way, but, of course, the correct thing to do is what you did.

Those Chinese guys are pretty smart. I also once had a small restauranteur talk to me about becoming his accountant. For a while I thought that he understood only two words of English, i.e., "No Tax," but later changed my mind when I asked to see his business records. He produced two of those yellow federal tax deposit coupon books--one "Wang
Cafe, Inc." and one "Wang Partners." It went like this:

Me: You have more than one business?
Wang: No.
Me: You have two books here--one for a partnership and one for a corporation.
Wang: Yes.
Me: These are both the same business?
Wang: Yes.
Me: For this one business here in this one location?
Wang: Yes.
Me: Do you understand that your cafe can't be both a partnership and a corporation?
Wang: Yes.
Me: Okay, fine. Now, which is it? A partnership or a corporation?
Wang: Yes.

[oceanlovin'ea]

Good one!

So what did you do with him? Leave him for the next accountant?

I also have a Chinese lady that called me about helping with her payroll. She has bought 2 motels, completely refurbished them and has them open now.

I can't understand her very well. I ask questions and she says "Talk to my son."

At this point, I haven't really done much with her. And haven't had the time or energy to put into it. But will call her son soon and see if they really want my help.

Linda

[Black Bart]

Wang's

Actually, I didn't do anything with Mr. Wang. He did something with me. When I told him the amount of FICA, etc. due on his payroll, he reverted to his "No Tax" line and decided to get another accountant.