Discussion:One member LLC deducting his wages on Sch C
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| Revision as of 14:44, 30 June 2006 Mikef (Talk | contribs) (I had this happe) ← Previous diff |
Current revision Warren (Talk | contribs) (I think that if) |
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| {{ForumReplyPost|UserID=Mikef|Date=30 June 2006|Text=I had this happen a couple years ago. ADP erroneously set it up. (FWIW, ADP does a very poor job in my opinion when setting up small employers). ADP wanted an arm and a leg to file amended payroll tax returns, so we simply showed the owners wages and payroll taxes on Schedule C, thereby reducing Schedule C profits. Coincidentally, client was later audited, and the issue never came up. In either scenario, the IRS is getting their same 15.3% payroll taxes, so no harm done. The only negative was my client had to pay unnecessary state unemployment taxes and ADP fees.}} | {{ForumReplyPost|UserID=Mikef|Date=30 June 2006|Text=I had this happen a couple years ago. ADP erroneously set it up. (FWIW, ADP does a very poor job in my opinion when setting up small employers). ADP wanted an arm and a leg to file amended payroll tax returns, so we simply showed the owners wages and payroll taxes on Schedule C, thereby reducing Schedule C profits. Coincidentally, client was later audited, and the issue never came up. In either scenario, the IRS is getting their same 15.3% payroll taxes, so no harm done. The only negative was my client had to pay unnecessary state unemployment taxes and ADP fees.}} | ||
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| + | {{ForumReplyPost|UserID=Warren|Date=30 June 2006|Text=I think that if it is set up wrong and W-2 is issued you should go back and amend payroll reporting and get a refund of payroll taxes. It's a pain but I think that is the way that it should be handled. The wage reporting could affect Section 179, Section 199, pension contribution, etc.}} | ||
Current revision
Discussion Forum Index --> Tax Questions --> One member LLC deducting his wages on Sch C
| 26 June 2006 | |
| What's the impact from the IRS standpoint? Employment taxes on the LLC for the wages paid to member? Otherwise. what other impact on 1040 if any? | |
| 26 June 2006 | |
| It is improper to do so, assuming the LLC has not elected to be taxed as a corporation (in which case Sch. C would not be used at all). Potential for major problems may exist if a retirement plan is involved. | |
| 26 June 2006 | |
| A sole member LLC should not pay wages to member if it hasnt elected to be taxed as a corporation. | |
Inagpurwala (talk|edits) said: | 26 June 2006 |
| Taxref and Warren:
It has not happened with my clients yet, but if Single member LLC did pay wages and issued W2, then how to correct this error after the facts. IshaqInagpurwala 18:00, 26 June 2006 (CDT) | |
Janakpatel (talk|edits) said: | 29 June 2006 |
| Single member LLC is a disregarded entity, is subject to self emplyment taxes on his taxable Sch C income. | |
| 29 June 2006 | |
| If you have a Single member LLC, taxed as a SchC, who has been paid W-2 wages, you'll need to file amended payroll tax returns to eliminate the owner's wages and have the taxes refunded. The individual should be paying estimated taxes for the self employment income. | |
| 30 June 2006 | |
| I had this happen a couple years ago. ADP erroneously set it up. (FWIW, ADP does a very poor job in my opinion when setting up small employers). ADP wanted an arm and a leg to file amended payroll tax returns, so we simply showed the owners wages and payroll taxes on Schedule C, thereby reducing Schedule C profits. Coincidentally, client was later audited, and the issue never came up. In either scenario, the IRS is getting their same 15.3% payroll taxes, so no harm done. The only negative was my client had to pay unnecessary state unemployment taxes and ADP fees. | |
| 30 June 2006 | |
| I think that if it is set up wrong and W-2 is issued you should go back and amend payroll reporting and get a refund of payroll taxes. It's a pain but I think that is the way that it should be handled. The wage reporting could affect Section 179, Section 199, pension contribution, etc. | |
