New Federal Withholding Tables

Thanks to the federal stimulus package that reduced federal withholding amounts for most of the year you will now be getting a smaller paycheck. The tables are again being readjusted to remedy errors in the original package. It may be too little to late though. Many taxpayers are expected to have reduced refunds or even worse - owe at the end of the year. Prepare yourself accordingly.

Shareholder Payments

IRS audits now routinely review S corp payments to shareholders to see if payroll taxes are being avoided by treating payments to shareholder-officers as loans or shareholder distributions of cash or property.

An officer performing services for a corporation is entitled to payment; those payments are wages. For federal employment tax purposes, corporate officers are employees.

Avoiding employment taxes by treating compensation as cash distributions, expense reimbursements, or loans rather than as wages is illegal.

Make sure you are paying your shareholders correctly! Get a check-up of your books.