Help with S Corp nuts and bolts

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strongboy2005
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Joined: Fri Aug 28, 2015 9:11 pm

Help with S Corp nuts and bolts

Post by strongboy2005 » Mon Jan 02, 2017 11:38 am

Hello knowledgeable bogleheads,

I'm a physician who is going to be a part of a general partnership in 2017. Many of the partners form S corps for the liability protection and savings on the Medicare tax.

I have everything in order to get the S corp started. However, I have struggled to nail down the nuts and bolts of how to pay myself.

I anticipate making $150,000 in 2017 and paying myself a salary (W2) of $100,000 and distribution (K1) of $50,000. My goal is to do this all myself and not use a payroll company.

The partnership will pay my S corp my salary on a monthly basis. This will go to a business checking account in the corporation's name. From there, I will pay myself.

This is where I get confused. Do I literally just write myself a check every month for my salary and another check for my distribution? Write in the check memo what it is? Do I have to issue myself an earnings statement with each paycheck, or is it adequate to simply issue myself a W2 at the end of each year?

Finally, I know about form 940 (federal unemployment tax, filed anually) and form 941 (federal income tax, filed quarterly). There is also California form 100S for the Franchise Tax board Corporation tax. For tax filing, form 1120S and schedule K1. Am I missing any other forms?

Can the corporation pay the FICA taxes quarterly, or does it have to be paid with each paycheck I issue to myself?

I plan on simple bookkeeping in an Excel spreadsheet to document each salary payment, each distribution, and tax payments. Is there any need for more advanced bookkeeping? To be clear, I will have only one source of income, so I don't think it will be overly complicated.

Thanks in advance!

danaht
Posts: 427
Joined: Sun Oct 18, 2015 11:28 am

Re: Help with S Corp nuts and bolts

Post by danaht » Mon Jan 02, 2017 12:08 pm

A $100,000 salary requires a monthly payroll schedule I believe (not 100% sure on this). The easiest option is to get a payroll service to automatically run your monthly payroll. Some of the these payroll services can be free. I use Bank of America's basic Intuit Payroll service - this is a free service as long as you have a Bank of America Business checking account + personal B of A Checking account and make all of your payroll deposits into the personal B of A account. The B of A payroll service also e-files the W2, 940, and 941 forms for you (as long as you hit the button to file these on time). The basic service won't file any of the state forms for you. One thing you forgot to mention is state unemployment insurance - you will need to file and pay for this also. I am not familiar with all of the California s-corp requirements - since I am in Texas.

Also, keep in mind that you will also have some expenses for your s-corporation (at the very least employer payroll taxes) - so your distribution will probably be less than $50,000 because of the expenses.

DSInvestor
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Re: Help with S Corp nuts and bolts

Post by DSInvestor » Mon Jan 02, 2017 12:34 pm

I suggest that you meet with a CPA to help you with S-Corp issues. I had one when I ran my S-Corp. CPA help me keep up with annual, quarterly and other filings as well as how to setup the accounting system and payroll. My CPA would call me at least once a quarter to let me know what to expect in the mail and what filings are coming up soon. CPA prepared my S-Corp tax returns (fed and state) and also my personal returns for few years. Personal returns are pretty easy so I took those over later but had her do my corp returns. I did not do my own corp returns until she retired. Thankfully I could use the old tax returns prepared by the CPA to reverse engineer everything to figure out what entries went where.

You may want to give the small business retirement groups at Vanguard and Fidelity to see what options would work best for you. If you're a partner in that medical practice, you may have some controlled group issues that make you ineligible for Solo 401k.

matonplayer
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Re: Help with S Corp nuts and bolts

Post by matonplayer » Mon Jan 02, 2017 12:44 pm

I would advise not doing payroll yourself. I tried it with a three person company and it was a nightmare trying to do it without screwing up. As far as distributions go, our board of directors (my wife and I) would meet annually and determine an annual distribution which was then documented in our annual meeting minutes.

Spirit Rider
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Re: Help with S Corp nuts and bolts

Post by Spirit Rider » Mon Jan 02, 2017 3:16 pm

I agree with the consensus. Bogleheads like to minimize expenses, sometimes take it to extremes.

The free BoA Intuit payroll option is a good one. It will handle all the calculations and do the Federal payments automatically. You will be left with doing the state payments yourself which should be manageable.

I also suggest you engage a CPA at least for the first year or two.

strongboy2005
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Joined: Fri Aug 28, 2015 9:11 pm

Re: Help with S Corp nuts and bolts

Post by strongboy2005 » Thu Jan 05, 2017 11:34 am

Thanks for the good advice. I will definitely be looking into the free intuit payroll service. Does this service also help with distributions, or is this just a check I write myself?

Spirit Rider
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Re: Help with S Corp nuts and bolts

Post by Spirit Rider » Thu Jan 05, 2017 11:55 am

strongboy2005 wrote:Thanks for the good advice. I will definitely be looking into the free intuit payroll service. Does this service also help with distributions, or is this just a check I write myself?

In order to use the free service you must have a BoA business account and have your net pay direct deposited to a BoA personal account.

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Hayden
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Re: Help with S Corp nuts and bolts

Post by Hayden » Thu Jan 05, 2017 11:59 am

strongboy2005 wrote:Thanks for the good advice. I will definitely be looking into the free intuit payroll service. Does this service also help with distributions, or is this just a check I write myself?


You don't want to do distributions through payroll.
What I do:. Hold a meeting and approve a distribution. Document this in meeting minutes. Write the distribution checks (I have two owners, so two distribution checks).

staybalanced
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Re: Help with S Corp nuts and bolts

Post by staybalanced » Thu Jan 05, 2017 12:02 pm

Do not do payroll yourself, your time is worth much more...trust me.

Check out gusto payroll, or sure payroll. I had problems with intuit payroll in my business with quarterly filings.

It is worth going full service payroll even just for one person, gusto charges $45 per month to do everything you need.

Distributions are a check you write yourself you can write them however often you want. Remember you have to have the profits and or basis to write a distribution.

You need a good CPA as well.

Sandi_k
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Location: SF Bay Area

Re: Help with S Corp nuts and bolts

Post by Sandi_k » Fri Jan 06, 2017 2:23 pm

My husband was using Paychex 1x per month; they charged $100+ to do payroll.

He just moved to Square (with whom he'd already established a merchant account). They are charging $25 for the 1x per month paycheck via the S Corp.

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Rob5TCP
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Re: Help with S Corp nuts and bolts

Post by Rob5TCP » Fri Jan 06, 2017 2:43 pm

I've been a solo Sub S corporation from the beginning (about 1989). I do my own pr using off the shelf software. The quarterly reports take me about 20 minutes a quarter. While I used to do payroll weekly, then switched to bi-weekly, then monthly. For the last five years, I've been doing my payroll quarterly. It just makes it easier to file the tax withholding once a quarter. I've had no problems with that (at least so far).

The only possibly issue I've heard about is if I would ever do work under my name rather than corporate. I make sure all bills come form the company and I work for the company. When I received a rather large commission for a referral, I returned the check that was written to me (and had it made out to the corporation). I was an agent of the company when I gave that referral.

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gasdoc
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Re: Help with S Corp nuts and bolts

Post by gasdoc » Fri Jan 06, 2017 10:10 pm

I use my CPA for a payroll schedule and write the checks to myself monthly. Probably not the cheapest route, but I like having the tax work and payroll services under one roof.

Gasdoc

danaht
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Re: Help with S Corp nuts and bolts

Post by danaht » Fri Jan 06, 2017 10:58 pm

staybalanced wrote:Do not do payroll yourself, your time is worth much more...trust me.

Check out gusto payroll, or sure payroll. I had problems with intuit payroll in my business with quarterly filings.

It is worth going full service payroll even just for one person, gusto charges $45 per month to do everything you need.

Distributions are a check you write yourself you can write them however often you want. Remember you have to have the profits and or basis to write a distribution.

You need a good CPA as well.



What type of problems with the quarterly filings did you have? Intuit Payroll (basic free service) has been great for me for many years. I did have one issue last year where a 940/941 filing was rejected because it was submitted too early at the beginning of the year. I received an email - and just needed to resubmit it later.

Dieharder
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Re: Help with S Corp nuts and bolts

Post by Dieharder » Sat Jan 07, 2017 12:27 am

QuickBooks desktop version with Payroll service. Works very well. You can do invoice and send it by e-mail from QB then record that in your bank account. You run Payroll and QB calculates everything for you then submit to Intuit for direct deposit. You also pay IRS and State directly from QB through online setup. You can file all your federal and state forms from it. You can generate W2 and file it at year end. Record expenses, and keep track of taxes. What else? there are very few things you cannot do.

I do direct deposit for the W2 part and for the distribution just write a check to myself from the business account to personal account. I deduct employer share of payroll taxes and employer matching contributions to solo 401k as expenses from the businss income along with few other expenses. The remainig is personal income and I make estimated taxes on it, or sometimes just withhold additional taxes on the payroll.

I do have a CPA, but so far haven't used his services since this is the first year and so far none of this required CPA. I will do the taxes with the help of CPA, although I am sure I can do that as well with Turbo Tax for business.

Forgot to add, all of this takes less than 30 minutes every month,

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