The Tax Resources Blog

Archive for August, 2011

Payroll Tax Due Dates

Question: I am an S Corp. For estimating tax w/h, how do I differentiate between “draw” and salary?

I registered as an S corp two months ago and am consulting. After my client paid, I transferred some money every month to my personal a/c for the last two months.

a) Is this considered a “draw” or payroll?
b) Should I pay estimated tax with-holding for the draw?

Additional details: Jan. 15, 2008 is the due date for paying social security, medicare w/h. I registered with state (of GA), DOL, DOR etc. (Hope I didn’t overdo it).

Answer: I take it you are personal services S-corp.
What salary did you set for yourself? Is it reasonable for the type of work you are doing? That’s the amount you should be paying yourself.

W-2 income should be the bulk of the money you take home–after all you shouldn’t get a tax benefit from simply moving from a schedule C to a form 1120S. As such, that money is subject to regular withholding.

The “distributions” you expect over and above the salary are income like any other income and subject you to estimated tax requirements.

Be warned. The IRS can easily see if you put $20K on the wages line and $80K on the schedule E line…and will ask you to justify why you did it that way. Trying to avoid paying FICA/MC is not an excuse.

Due Date for Certain Federal Returns.wmv