Wife an I have real estate firm LLC this year we elected to be taxed as an S-Corp and filed all proper paperwork. I was aware that she would need to take a salary and have been taking regular withdrawals from business account thinking this was sufficient to be considered a salary. I have also been paying quarterly estimated income taxes. Now I realize she should have been set up on a payroll and we should have been paying quarterly payroll taxes. Is it too late to fix this or would if be better to just file to cancel the S-Corp selection and file taxes as LLC this year
About the only reason I see to elect corporation taxing for an LLC is for owners to be employees. Election is not to be taken lightly or switch yearly.
Yes, wages are supposed to be regular but consider the case of an LLC who is not profitable for first 10 months, should the owner be collecting a paycheck when the money to provide it has to be borrowed?
You can and should reclassify to date draws as net pay and gross up the wages for W2. You will have to file forms and pay taxes and will owe penalties but you will get a huge refund from the looks of it.
If no regular draws had been taken it would be much easier to justify that the reasonable salary is calculated only after it was determined there would be profit or that it was to be a single annual payment
get with a tax accountant as soon as possible, a local one.
You have clicked a link to a site outside of the QuickBooks or ProFile Communities. By clicking "Continue", you will leave the community and be taken to that site instead.
For more information visit our Security Center or to report suspicious websites you can contact us here
These cookies are strictly necessary to provide you with the services and features available through our site. Because these cookies are strictly necessary to deliver the site, you cannot refuse them without impacting how the site functions.
These cookies are used to make advertising messages more relevant to you and your interests. They also perform functions like preventing the same ad from continuously reappearing, ensuring that ads are properly displayed, and in some cases selecting advertisements that are based on your interests.