Payroll Taxes for Corporate Shareholder Wages

Seattle Corporate Shareholder Wages Lawyer

 

Shareholders at S-corps and similar business entities who are involved in the management of the business are required to be paid reasonable wages, and payroll taxes must be withheld from those wages. W-2 forms must be completed for these corporate officers. They cannot simply draw money from the company as payment. Doing so will lead to issues with the IRS.

The Bellevue, Washington, law firm of Lana Kurilova Rich PLLC provides representation to employers in the Greater Seattle area, statewide and nationwide. If you have been contacted by the IRS about payroll taxes for corporate shareholder wages, or you suspect you will be, call our Seattle attorney at (425) 289-0629 for an initial phone consultation.

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Washington Attorney, Helping to Avoid a Common Payroll Tax Error for S-Corps

 

Certified public accountants (CPA) who are not always well-versed in the differences between different business entities frequently fail to advise business owners about the requirement to pay shareholders (who are often also the business owners themselves) reasonable wages. This is because this is not a requirement of other business entities, such as LLCs and sole proprietorships. In some cases, business owners may pay shareholders a very small amount. The payment must actually be aligned with the wages paid to other workers in the industry, or the IRS may interpret a low wage as an intentional attempt to avoid payroll taxes. The IRS then has the power to reclassify all draws into wages, with the resulting additional tax, interest, and penalties.

This is not an ordinary IRS tax problem. When the IRS discovers this error, they may view all funds drawn from the business by the shareholders and use that as the basis of calculating payroll taxes. They will then add interest and penalties. If we can demonstrate that this was an error, that the taxpayer received a wrong advice (or no advice) from his CPA, or the wages paid were in fact reasonable, we may be able to work with the IRS to achieve a reasonable settlement or avoid this extra tax liability altogether. That is our goal.

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For Tax Problem Resolution, Call (425) 289-0629 for an Initial Phone Consultation at Our Bellevue, Washington, Law Firm

 

We invite you to contact us today by phone or by e-mail to discuss your case with our experienced Washington payroll tax lawyer. Find out how we can help. We serve clients nationwide.

 

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