I'm 50% owner in an S-Corp. My partner and I have been on the company payroll up until this year: 2020. We took ourselves off as our staff grew. The logic being to ensure we could always cover payroll and just take our draws when and where there is profit as we grew. Oops.
In order to correct this, it is my understanding we need to reclassify the applicable draws and create one paycheck for the 4th quarter. I was advised this by an online tax advisor and I have already put us back on regular payroll for checks going forward.
Where I'm a little lost is how to record this in QBO. Conceptually, I grasp it should be an added record taking from the draw/equity account (where draws are recorded) and applying/moving the funds to payroll. What I'm hoping to achieve, if possible, is to record the change of funds, apply each portion (50/50) to myself and my partner, and have QBO payroll run "system recorded" tax info and generate the normal e-file as usual. Only this time including taxes owed on the large "paychecks".
To summarize: Is there an easy way to move equity to payroll and have QBO payroll generate the paycheck, 941 and state tax info?
Appreciate the reply. Perhaps I wasn't clear, but the suggestion you provided is exactly what has already been done. What I'm trying to do, is take those draws on record and reclassify them as a single W2/Paycheck payment in Q4. So all of the applicable taxes will also file on the upcoming 941, state and UI taxes etc...