Income and Expense through W2 wage
When you are an active shareholder with a W2 wage through your S-Corp it becomes personal income and a business expense.
Your salary must be reasonable compensation, you can utilize then benefit of being an employee through your corporation or LLC.
“How does this work” you ask? It’s actually very simple.
- Pay yourself a reasonable compensation through your corporation or LLC.
- Your salary will come to you each pay period as you see fit
- You can have Federal and State withholding to help with tax liability on your 1040 and State returns.
- Your business will file payroll reports and pay payroll taxes each quarter, some of which is withholding out of your paycheck.
- You report the income in the form of a W2 and the business can deduct your salary and the company portion of payroll taxes.
- This will be reported on your paystub each pay period and on your W2 at the end of the year
In addition to deducting your wage as an expense, you can take advantage of the full benefits of owning an S-Corp
- Deduct Medical Expenses in Your S-Corp
- How you get paid as an owner of an S-Corp
- Define Reasonable Compensation for yourself
- Creating Your 401K Plan for your S-Corp
Interested in getting started?
We are your experts in small business accounting. Contact our office in Detroit Lakes or Fargo and we can help you get on the right track with reasonable compensation through your small business and answer any questions you may have!