Message Board › S Corp No Salary
This topic contains 2 replies, has 2 voices, and was last updated by Peter Muffoletto 3 months ago.
August 15, 2019 at 4:02 pm #176435Michael RayParticipant
I’m preparing a 2018 S-Corp return with no officer salary paid in 2018. Taxpayer has paid an Officer salary in the past but messed up in 2018. Is there a way to retroactively pay a salary for 2018 or does he have to file without a salary and wait for the audit!
August 15, 2019 at 4:37 pm #176436Peter MuffolettoParticipant
Review the transactions relating to what the “officer/shareholder” disbursed to shareholder, and determine if there is reasonable basis for changing that part of the distributions to wages, file amended 941’s, and issue the appropriate W2, and have the client pay the payroll taxes. You can tax zero withholding, and hopefully the shareholder paid the appropriate estimated taxes to cover the personal tax liability, if not then evaluate the overall cost of not doing so including any penalties, and interest against the potential of the audit costs.
Going forward this is an excellent example of an opportunity for you to explain the benefits of pre planning which obviously did not take place – this way to avoid potential problems, and costs of not doing so.
August 15, 2019 at 4:42 pm #176437Peter MuffolettoParticipant
sorry about the grammatical mistakes – I was distracted – the sentence should have stated you can take zero withholding for the purposes of the wages. either way the taxpayer should have paid the appropriate ES payments during the year. By going with the zero withholding the penalties will be lower – but if the shareholder did not pay the appropriate ES payments during the year, or failed to pay with the extension of their personal return the appropriate amount of personal income taxes, then the penalties will be lower if the withholding is included compared to the monthly failure to pay penalty that will be assessed against the personal income tax return assuming that there is a shortfall.
if you have further questions, call me.
Pete Muffoletto, CPA