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Originally Posted by casual I started an S-Corp in July this year in Illinois. I am the only Shareholder. My company has income from July. I did not take any distributions or salary to myself till now.
Please answer the following questions
1. Is it obligatory to take salary or can I take distributions at year end? |
1). A shareholder is an employee and should take a reasonable salary. If your business needs the money and can't pay a salary you do not have to take a salary. You may take cash distributions of profits at any time, however, if you have not taken a salary the question arises as why can you take a cash distribution if you can't afford to take a salary. If you are talking about a small dollar amount take the cash distribution because you need the profit paid-out to pay the 1040-tax on the profit and forget about the salary.
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Originally Posted by casual 2. I have a federal EIN and state EIN. Can I start taking salary from this month? If yes, what all taxes the company has to pay and what all taxes the company has to withhold from my pay check? |
2). You may take salary at any time calculated in any way so long as it is reasonable. Withholding taxes may be determined from tables in IRS publication 15.
http://www.irs.gov/pub/irs-pdf/p15.pdf Quote:
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Originally Posted by casual 3. What all things are required to start paying salary to myself? |
3). Read the IRS pub 15.
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Originally Posted by casual 4. My company did not pay any estimated taxes till now. Does the company need to pay any estimated tax? |
4). An S-corp does not pay federal estimated income tax as the profit is taxed on your 1040. You should use form 1040ES to pay personal estimated income taxes.
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Originally Posted by casual 5. I would like to reduce taxes by starting a retirement plan. Can you suggest which one would be better and how much can I save? |
5). The simpliest and probably the best is the SEP-IRA which is calculated on a percent of your profit.
http://www.irs.gov/pub/irs-pdf/p560.pdf Quote:
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Originally Posted by casual 6. I will be taking vacation early next year. Can I carry-over any income from this year without paying any tax, so that I can take salary when I go on vacation next year? |
6) All S-corp profit every year is taxed on the shareholders 1040 regardless of how much money is taken out of the corp. So, no all profit is taxed, however, when you take a salary is up to you and the S-corp gets a deduction from profit in the year that you take the cash. You of course get a W2 and have the income when you take the cash from salary.
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Originally Posted by casual 7. What are all the tax papers does my company need to file and when?
Thanks in advance,
Small Business Owner |
7). Federal payroll taxes withheld are reported to the IRS on form 941, usually quarterly but may be monthly if large payroll (see pub 15). Payment of payroll taxes are usually paid to the gov through your bank with a payment coupon. State payroll tax withholding is reported on IL-941. You will also have a quarterly state unemployment tax and an annual Federal 940ez tax. The S-corp is required to anually file a Federal 1120s tax return and a state IL-1120 or IL-1120-ST.
my 2???
