Discussion:FICA limits with 2 companies paying wages
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Discussion Forum Index --> Tax Questions --> FICA limits with 2 companies paying wages
Bomber9996 (talk|edits) said: | 23 June 2008 |
| I have client that has 2 S-Corps, both paying wages to >2% S/H. The IRS has told us that both companies must pay EE and ER portion of FICA until each company pays wages to the 102,000 limit. When done this way it appears there is no recourse for the company to get back the ER portion that they have over paid (we know the S/H gets credit on return when filed). Does anyone know the proper way to handle this or how to get the funds back and still have the 941 correct? I searched the site for previous questions on this topic so please forgive me if I somehow missed it. Thanks for your help! | |
TheTinCook (talk|edits) said: | 23 June 2008 |
| ยง31.3121(s) | |
| 23 June 2008 | |
| I think that cite would be Code Sec. 3121(s). I can't find a Reg. 31.3121(s).
BTW, Bomber, if you tell us who you are you're more likely to get advice with a smile. -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 23 June 2008 | |
| a reg would probably start with 1.something look for a 1.3121(s) | |
| 23 June 2008 | |
| Thanks for prodding me, Kevin. I had searched for 31.3121 & came up empty. But with a cross-reference I found Reg. 31.3121(s)-1. -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
TheTinCook (talk|edits) said: | 23 June 2008 |
| Sorry, forgot the -1 | |
| 24 June 2008 | |
| Can the shareholder simply be an employee of only one corp, and then have the other corp reimburse the first for the salary and benefits? I have clients do this when they have employees working for more than one of the owners' companies, to avoid any ERISA and DOL problems with having different benefits for employees of common-ownership companies. But seems like this would also solve the double-dip company FICA problem. -Bob | |
| 25 June 2008 | |
| I have the same issue-just a question-How do you present the
salary on the 2nd company's 1120S? and also the reimbursement on the 1st company's 1120-s | |
Bomber9996 (talk|edits) said: | 25 June 2008 |
| I really appreciate everyone's input. I also am trying to figure out how to present the salary on the 2nd company's 1120S? and also the reimbursement on the 1st company's 1120-s. Am trying to wade through the reg. but I am "still new" at my new job so I am a bit crazed! :-) Will also get around to filling out my profile as soon as I can find a minute to breathe! Thanks again everyone! I love this site! | |
AnnabelleC (talk|edits) said: | 25 June 2008 |
| The way we handle this situation (ours is a bit more complex) is that we pay all salaries out of ScorpA. ScorpB reimburses ScorpA for their share of salary/insurance/payroll tax/pension and books to to an expense account "Contract Services-ScorpA"
ScorpA nets insurance and pension against those expense accounts and books the salary/payroll tax portion to an "other income" account (say.."Wage Reimbursement-ScorpB") This way the Wage Expense and Payroll Taxes on the 1120S for ScorpA match the W-3 for ScorpA. The biggest drawback is that gross income is slightly inflated for BPOL purposes, but it's negligible compared to potentially paying excess ER FICA. EDIT: Of course... in our case, SCORPB salary expenses are not for a >2% shareholder..... hmmmmm...) | |
| 25 June 2008 | |
| So, if SCorpB's 1120S doesn't indicate an officer/owner salary, isn't that a "red flag" re reasonable owners compensation? | |
| 26 June 2008 | |
Tmreedcpa-My point exactly-On Corp A-I have been showing, as
a separate items-"Recovered expenses" and reducing the three major catagories paid by "B" (Occupancy expenses direct labor and Administrative expenses.) On A, I have shown the SH/Officers in detail and complete, and reduced by the amount shown on the "B" corp return. So far so good, for 7 years, but not totally comfortable with it. Any suggestions would be very much appreciated. | |
Bomber9996 (talk|edits) said: | 3 July 2008 |
| Additionally (added to the 1120S issue) we have the 401k plan and profit sharing rules and regs to deal with. If everything is paid out of "A" and there are no wages in "B" then the 401k plan and profit sharing plan for both "A" and "B" are messed up. Thanks again everyone for your input and if you know anyone who has the same or similar situation please ask for their input on how they handle this. | |
| 3 July 2008 | |
| Bomber, you may want to go ahead and pay all salaries out of one of the S corps, with reimbursement for these "leased" employees, and then cancel all the employee benefits plans at the S corp with no employees. This is a way to comply with ERISA and DOL concerning benefits paid to employees of separate companies with common ownership. Maybe you can review this with a tax attorney. As an aside, when you eliminate one company's benefit plans and shift the employees to the sister company, you should expect to save some operating expenses, because you no longer have duplicate benefit plan compliance costs. | |
| 3 July 2008 | |
| User:Bomber9996 posted this on MyTalk, but I think it's more appropriate as a continuation of the discussion above.
"Additionally (added to the 1120S issue) we have the 401k plan and profit sharing rules and regs to deal with. If everything is paid out of "A" and there are no wages in "B" then the 401k plan and profit sharing plan for both "A" and "B" are messed up. Thanks again everyone for your input and if you know anyone who has the same or similar situation please ask for their input on how they handle this." -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 17 December 2008 | |
| I am considering a common pay master for an s corp that I am handling. Only "employee" is sole owner of this s corp. He is also a non-owner employee of another s corp that would become the common pay master. I think I would show officer payroll with a note that no payroll filed as it is included in common pay master with their id#. My concern is funding a sep-ira. I think he would be out of luck because there is no w-2 from the S corp. If I am on track the fica savings aren't worth giving up the sep-ira deduction. Thanks for your thoughts! | |
