Payroll & Why S Corps Need To Run It - a podcast by Bette Hochberger

Hey, I'm Bette Hochberger, CPA, CGMA, and today we will talk about why running payroll when you are an S corporation owner is essential. Okay. So you have to run payroll when you're an S corporation owner. The IRS, the government, knows that many people create S corporations because they function similarly to an LLC. Or a partnership where you get that flow-through entity, and you get the tax savings of not being a regular C corporation where the taxes are a lot higher. And the other cool thing is with the S corporation; you're not paying self-employment tax on all that income because if you were just an LLC or you were a sole proprietor or just a regular partner, you'd be paying self-employment tax on all of your net income, and that could be a little bit painful.  So, the result of that is because the government knows you're not paying money into that self-employment tax; you do need to run payroll to get those payroll taxes paid in. So, payroll tax and self-employment tax is kind of the same thing.  So when you're an S corporation owner, I don't care how much you're making, how little you're making, whatever the IRS can come in and make your life a living hell if you're not running payroll. So run payroll, please. But, of course, there are other reasons you want to do it besides the fact that you can be inviting an IRS audit, which nobody wants. Still, if you're looking for some other tax planning and you're an S corporation owner, you might be looking at some retirement accounts, and a lot of times, you need to be on the payroll for those retirement account contributions to happen. So if it's not enough that the IRS wants you to run payroll, do it so that you can put away money for your future and lower your taxes at the same time, which is fantastic.  If you aren't set up already to run payroll, it's not the fastest process. You do need to register with your state. So tick tock because the sooner, the better, because we're already a week into December.  So that's my big tip for today. If you are an S Corporation owner, run your payroll! Thanks. #TaxTipTuesday

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