S-Corp Owner CPA Managed Payroll & Tax Planning Services
Keith P Clark CPA PC – Serving Colorado’s Front Range from Denver to Colorado Springs
Completing all of your payroll responsibilities on a regular basis can take up time that would be better put towards developing your business. Keith P Clark CPA PC offers affordable payroll services for S-Corp owners that would like to spend that time on other pursuits.
Understanding how much to pay yourself and how much federal and state withholding tax to pay in is better left to the professionals to keep out of potential trouble with the IRS and state tax authorities and to avoid unforeseen large tax liability surprises at tax time.
Whether you already have your payroll accounts set up with the relevant tax authorities, or you need us to set up new payroll tax accounts for paying taxes and filing returns from scratch, we are able to accommodate your S-Corp payroll needs.
Please click the link here for detailed pricing for our various CPA service packages for S-Corp owners.
Comprehensive CPA Managed Payroll Services for S-Corp Owners
- Payroll processing
- Payroll tax reporting
- Federal/state/local payroll tax filing
- Business owner tax planning
- Assist in determination of S-Corp owner salary amount
- New payroll account setup
Please click the link here for detailed pricing for our various CPA service packages for S-Corp owners.
We Also Offer Accounting & Bookkeeping Services! Learn More Here
S Corporations and Shareholder/Owner Salaries
An S corporation (S-Corp) is a pass-through entity in which net income and losses pass through the corporation to the owner’s personal tax returns. Many small business owners use S-Corps as their choice of entity structure as it provides the opportunity for potential savings of Social Security and Medicare (FICA) taxes.
However, in order to maximize this strategy, careful planning needs to be done, or else this can all backfire costing the business owner unnecessary expense of overpaid tax dollars as well as the cost of filing the annual S-Corp return (Form 1120-S). Or worse yet, S-Corp owners not paying themselves enough of a salary (or none at all) and getting in trouble with the IRS for not getting enough Social Security and Medicare (FICA) taxes paid in for the year.
An S-Corp shareholder/owner who performs more than minor services for the corporation will be its employee for tax purposes, as well as a shareholder. In effect, an active shareholder in a S corporation is both a shareholder (owner) of the corporation and an employee of the S-Corp.
This allows for savings on Social Security and Medicare taxes because such taxes need not be paid on distributions of earnings and profits from the corporation to its shareholders. Thus, to the extent they pay themselves shareholder distributions instead of employee salary, S-Corp shareholder / employees can save significant dollars on payroll taxes.
The S-Corp shareholder(s)/owner(s) need to determine how much salary to pay themselves, which is known as “shareholder reasonable compensation”. The S-Corp owner(s) will be responsible for making this decision which can be a challenge since the salary amount is somewhat subjective and based on multiple factors.
Contact us today to get more information about how we help S-Corp owners
Reasonable Compensation Must be Paid to S-Corp Owners
An S corporation must pay reasonable W-2 employee compensation to each shareholder-employee in return for the services the owner provides before a distribution (not subject to employment taxes) may be given to the shareholder-employee.
Unfortunately, many S-Corp owners have made the mistake of having their company pay them no employee compensation at all, thus avoiding having to pay any payroll taxes. The IRS Inspector General found that in 2000 about 440,000 single shareholder S-Corps paid no salary to their owners, costing the government billions in lost payroll taxes. As a result the IRS has increased enforcement efforts on this issue and audited thousands of S-Corps that paid their owners little or no salary.
If the IRS concludes that an S-Corp owner has attempted to evade payroll taxes by disguising employee salary as corporate distributions, it can recharacterize the distributions as salary and require payment of employment taxes and penalties which can include payroll tax penalties of up to 100% plus negligence penalties. The IRS will do so if it concludes that the company paid the employee unreasonably low compensation or no compensation at all for his or her services.
For example, a CPA who incorporated his practice took a $24,000 annual salary from his S corporation and received $220,000 in dividends which were free of employment taxes. The IRS said that his salary was unreasonably low and that $175,000 of the dividends should be treated as wages subject to employment taxes. The court upheld the IRS’s power to recharacterize the dividends as wages subject to employment tax. (Watson v. United States, (DC IA 05/27/2010) 105 AFTR 2d.
The experienced staff at Keith P Clark CPA PC will work closely with you to determine the best payroll solution for your small business. Our CPA managed payroll service for S-Corp owners features flat-rate monthly pricing with no hidden fees and is priced with our standard comprehensive package including accounting/bookkeeping and tax and owner salary planning.
Please click the link here for detailed pricing for our various CPA service packages for S-Corp owners.
S-Corp Owner Accounting Services
Custom Accounting Solutions
Keith P Clark CPA PC will work closely with your Denver area business to determine the most effective combination of accounting services for your unique needs. Whether you’re only interested in an initial set-up for your books or you’d like to set up regular accounting services, Keith P Clark CPA PC has the experience to get you back to business with accurate records in no time. We provide a broad range of accounting services and business consulting services for local Colorado companies of any size. From small businesses to large corporations, we can tailor our services to whatever your business may need.
Timely and Accurate Reporting
With professional bookkeeping and accounting services, your Denver area business can stay organized and accurately track every business transaction. By properly recording your cash flow and keeping all accounts balanced, you will always know exactly where you are financially. This not only helps you to make smarter business decisions, but reduces the risk of inconsistencies when reporting to financial managers, investors, and tax authorities. Businesses of every size will benefit from knowing that a professional accountant will prevent any financial errors, fraud, or tax problems down the road.