S Corp and W2

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  • thetaxman2200
    Member
    • Jan 2012
    • 53
    #1

    S Corp and W2

    Good Afternoon

    I have two clients who will be purchasing a business and an investment, however will not be participating in the day to day business. They will own 50% each and will have a manager and employee and sub contractors working, again they will not participate in the day to day activities. Do I need to issue them paychecks (W2 at the end of the year?). I am thinking this would be consider passive income/Losses!

    Thank you in advance.
    Tags: None
    • TAXNJ
      Senior Member
      • Jan 2007
      • 2106
      #2
      Have to....

      make sure "no services". See reference below (not all inclusive) along with your other research.

      S corporation employees, shareholders and corporate officers | Internal Revenue Service
      https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-and-corporate-officers
      The definition of employee for FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act) and federal income tax withholding under the Internal Revenue Code include corporate officers.
      Always cite your source for support to defend your opinion

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