With the end of the year approaching, entrepreneurs everywhere are reflecting back on a year of business decisions. What worked? What didn’t? How can I really get the ball rolling for 2016? For those new small business owners out there who have yet to incorporate, we have a suggestion. The S-Corporation. Why? Because the payroll benefits are undeniable.
When you have an S-Corp and use a service like Paychex through MyCorporation to handle all of your payroll needs, there’s absolutely no reason you shouldn’t be starting 2016 with more cash in your wallet and a sense of peace knowing the professionals are handling a huge part of your business for you.
In December, accountants typically recommend their clients take a one-time salary before the tax year is over. This can get confusing for a lot of first-time (and even veteran!) business owners. Paychex will walk you through the process and provide their recommendations while doing all of the work for you.
In addition to this seasonal benefit, there are a couple other great reasons to form an S-Corp for payroll reasons:
What is a reasonable salary?
S-Corporation shareholders who provide services to the S-Corp are required to take a reasonable salary. The term “reasonable salary” seems to trip up a lot of people. ‘Reasonable’ is subjective and vague- who’s to say you’re taking out the right amount? Paychex helps you figure it out. They’ve helped calculate millions of “reasonable salaries” over the years, so you’ll be sure to avoid the penalties for taking the wrong amount.
Avoid an audit.
Since distributions are not subject to Self-Employment taxes (SS and Medicare), if the shareholder has only taken distributions in the year with no salary this could pop up as a red flag to the IRS, causing an audit. The IRS could then reclassify the entire income as salary, causing the shareholder to pay back taxes plus penalties.
Don’t be a victim of an IRS audit. Paychex will withhold/deposit all payroll taxes, prepare and file year end returns, and do everything they can to make sure you’re avoiding the possibility of an audit.
Don’t have an S-Corp? Form one today! Want to cash in on all those payroll benefits? Give us a call for a free consultation! Visit us at MyCorporation.com or phone us at 1 877 692 6772 with any questions.