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Experienced Member
10 Comments
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Re: Payroll Tax applied on foreign C corporate owner

Hey @mzenah - welcome to QB Community. Would love to hear more about your business. You live and work in Canada but your C Corp is located in the U.S.?

Experienced Member
Re: Payroll Tax applied on foreign C corporate owner

Hi Emily, 

Yes that's right , i live & work in Canada & own drop-shipping C corporate in Florida USA 

hope you can help me with issue 

 

Maha

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Re: Payroll Tax applied on foreign C corporate owner

Got it - thanks for clarifying! For some basic information on paying yourself from your C Corp, check out this article from the U.S. Internal Revenue Service. I also like this article for considering whether to pay yourself a salary or take an owner's draw.

 

@Peter_G_Stone, @Rustler@lynda, any thoughts on Maha's situation?

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Re: Payroll Tax applied on foreign C corporate owner

@EmilyCowan

 

Your linked article
https://quickbooks.intuit.com/r/payroll/salary-or-draw-how-to-pay-yourself-as-business-owner/


is wrong in the paragraph titled ?The Right Method for You: salary or Draw"
"Most businesses are set up as a sole proprietor, LLC, or a partnership, which means that you may have the opportunity to take a draw or a salary (or both) ...... Your decision about a salary or owner’s draw should be based on the capital your business needs, and your ability to perform accurate tax planning."


sole proprietors and partners are not allowed to be on salary, so there is no decision to make
c- and s-corporations require working shareholders to be on salary - again no decision to make

 

LLC has nothing to do with anything and is not recognized by the IRS as a business type.

Established Community Backer ***
Re: Payroll Tax applied on foreign C corporate owner

Hey @Rustler. Thanks for your feedback on that article - I'll be sure to pass it on!

 

Any thoughts on @mzenah's situation as the Canadian owner of a U.S.-based C Corporation?

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Re: Payroll Tax applied on foreign C corporate owner

@mzenah

 

You pay yourself a salary based upon where you work, Canada from what you say.

 

Whoever is running your other operation would be on salary and US taxes would apply to him.

ProAdvisor
Re: Payroll Tax applied on foreign C corporate owner

@EmilyCowan and @mzenah:   I would always defer a question like this to the CPA that does your tax filing for the business.  He/she would know the complexities of the business and the tax laws/rules around being a Canadian owning a business in the US.

 

Lynda

Community Backer ***
Re: Payroll Tax applied on foreign C corporate owner

@mzenah, as a corporate officer, you are obligated to pay yourself a salary. This is not optional under US federal tax law. Although you live in Canada, the business is based in FL and this is where payroll taxes will be paid. I understand FL has no income tax, so most likely you will have no payroll tax other than SUTA for the state. However, I am unfamiliar with FL tax law, and I suggest you consult a knowledgeable FL CPA, EA, or other tax/accounting professional. 

Normally, on the federal side, you have 15.3% total FICA withholdings that will need to be paid. The company pays half for you, and is half deducted from your gross pay. There is also FIT that will vary depending on your gross salary amount. This amount must be paid with your other employees (if any) withholdings with the company's 941 payroll taxes. Frequency of payments (bi-weekly, monthly, yearly) depend on different factors.

Seeing as how you live and work in Canada, I'm sure there are more  complexities for you personally with the salary (i.e currency exchange). I advise you to consult a professional with multi-national business experience. Thanks, hope that helped some.

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Re: Payroll Tax applied on foreign C corporate owner

@Peter_G_Stone wrote:

@mzenah, as a corporate officer, you are obligated to pay yourself a salary. This is not optional under US federal tax law. 

 

I read this differently, I do not see a definite requirement for an officer who does not work in that location.

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. When corporate officers perform a service for the corporation and receive or are entitled to payments, those payments are considered wages.

 

If an officer does not perform any services or only performs minor services and is not entitled to compensation, the officer would not be considered an employee.

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Re: Payroll Tax applied on foreign C corporate owner

@Rustler, good points, but whether @mzenah is working at the location is not the main issue. The services provided are. I based my answer off the assumption that there are significant services provided from the OP. Perhaps there are not. Maha, should see a professional where these topics can be discussed in depth.