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.?

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

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?

@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.

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?

@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.

@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

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@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-a...

 

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.

@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. 

So If i do a main role into my company i need to be paid & withhold tax even if i work outside USA right?

Thanks , i actually asked Several CPA's but i get conflicting , one told that i may apply  for tax withhold exemption & filling form w-8ben , another told me i need to withhold tax for my payroll , another one told me that my payroll is not taxable due i don't have physical presence into USA so i'm not considered engaged in trade in USA so i don't to pay tax .

i'm really confused 

I have the exact same situation and also got conflicting answers from different CPAs. Please let me know if you find the correct answer and I will do the same.

Hi Peter,

Followup question, I see that this is all based on "source income"

Does the source here refer to the business' location or the employee's location? It sounds like you're saying it's the business (and that makes common sense) but I can't seem to find any IRS pubs specifically defining it.

Thanks for any help!