How do I pay business owner who takes irregular paychecks (in frequency & amount) so taxes are taken out of check and are paid as appropriate?

There are two ways to pay a business owner who takes irregular paychecks.

The first one is by issuing an owner’s draw. Before doing so, it’s important to first set up an Owner’s Equity account. When creating this account, select Equity or Owner’s Equity as the account type.

After establishing the account, proceed to create a regular check instead of going through the payroll system. Make sure to record the transaction in the Owner’s Equity account you created earlier.

To ensure accurate tax deductions from the owner’s paycheck and that they're properly reported, it’s advisable to consult with a tax advisor. They can help determine the best way to ensure taxes are calculated and reported correctly.

The second one is by creating an unscheduled paycheck. If you prefer to process payments through payroll, you can create an unscheduled paycheck and then check in with your accountant to ensure everything is recorded accurately.

Additionally, you can check out these articles for future references in handling your state taxes: 

• Payroll Tax Compliance Link
• Set up QuickBooks Online Payroll to pay and file your payroll taxes and forms
• Pay and file payroll taxes and forms electronically in QuickBooks Online Payroll

If you need assistance with recording transactions or setting up payroll, I'm here to help. Let's make sure your payments and tax responsibilities are managed smoothly.

@RogelioL  "I appreciate you for reaching out about how to handle irregular paychecks for a business owner while ensuring taxes are taken care of appropriately.

Before issuing an owner’s draw, it’s important to first set up an Owner’s Equity account. When creating this account, select Equity or Owner’s Equity as the account type.

After establishing the account, proceed to create a regular check instead of going through the payroll system. Make sure to record the transaction in the Owner’s Equity account you created earlier.

To ensure accurate tax deductions from the owner’s paycheck and that they're properly reported, it’s advisable to consult with a tax advisor. They can help determine the best way to ensure taxes are calculated and reported correctly.

However, if you prefer to process payments through payroll, you can create an unscheduled paycheck and then check in with your accountant to ensure everything is recorded accurately."

My brother in Christ, focus.

@visionhomesoklah  It depends on what type of business it is.

If it is a Sole Proprietorship, you don't. Just do Equity draws instead. If you end up with negative Equity, either the owner is living loan-to-mouth, or something's gone terribly wrong.

If it is a Single Member LLC, you would do it pretty much like every other employee. Obviously it'd be sporadic, but I'd probably just go with whatever pay period most closely aligns with the frequency you do know. If the owner takes about one paycheck per month, go with Monthly pay periods for them. If more frequently than that, go Semimonthly or Biweekly. For ease of calculation, I'd go with the Bonus payroll item; it should allow you to reverse calculate what their gross pay should be based on the final amount they want to be paid.

If it's an S-Corp, they're required to receive regular paychecks and you should sit them down and explain that to them.

If it's a Partnership, they can't be on payroll and you should treat it as Equity withdrawals instead. Keep in mind that draws above and beyond their equity in the company could come back to bite them, income-tax wise.