Tax guides
Owner pay and payroll under US federal and state rules.
File overdue payroll returns despite unpaid tax, and keep new deposits current. A filed Form 941 does not cure a late deposit. The IRS may remove one qualifying period's penalty; later periods need separate grounds. Sole proprietors and most general partners owe payroll tax personally. At corporations and LLCs, responsible people may face trust fund liability for willful nonpayment.
Self-employed · Partnerships · Corporations
Cash and electronic transfers do not change worker status. Review who controls the work and check section 530; if employee treatment is required, start payroll and correct affected returns. The business owes employment taxes. Sole proprietors and general partners can owe them personally; responsible corporate officers and others can owe a trust-fund penalty for willful failure to collect or pay withholding taxes.
Self-employed · Partnerships · Corporations
Record work and residence states and change dates first. Sole proprietors, partnerships, and corporations must register where required, withhold and remit state and local wage taxes under both states' rules, and pay unemployment tax to the covering state; some states also collect worker contributions. Remote work can trigger business income or franchise tax in the work state.
Self-employed · Partnerships · Corporations
Yes, if your child does real business work and receives reasonable wages, the business can generally deduct the pay. Federal payroll tax exceptions depend on your business structure and your child's age; they do not apply to a corporation's wages. The child may owe no federal income tax on modest wages, but payroll reporting still applies.
Self-employed · Partnerships · Corporations
Verify amounts, furnish missing 1099-NECs or W-2s, then file 1099-NECs with the IRS and W-2s with Social Security. Separate filing and statement penalties fall on the filer: a sole proprietor personally, or the partnership or corporation. Prompt correction can reduce them; reasonable cause may remove them. Answer Notice 972CG within 45 days (60 for foreign filers).
Self-employed · Partnerships · Corporations
Before paying, collect a foreign individual's W-8BEN, a foreign corporation's W-8BEN-E, or the matching entity form, plus work-location proof. Foreign work generally needs no US withholding, 1099-NEC, or 1042-S. For US workdays, allocate pay; withhold unless exempt and generally file 1042-S/1042 even if exempt. The payer owes missed withholding. A US person abroad uses W-9 and 1099-NEC rules.
Self-employed · Partnerships · Corporations
If your LLC is taxed as a sole proprietorship, pay yourself with an owner's draw. If taxed as a partnership, use distributions or agreed guaranteed payments. Draws and ordinary distributions are not business deductions or separately taxed as pay; owners report business profit whether or not they withdraw it. Partnership distributions above tax basis can create gain.
Self-employed · Partnerships
First project the owner's full federal tax and wage withholding. The owner pays any remaining required federal installments through Form 1040-ES or covers them with extra wage withholding; pass-through profit is taxable without a distribution. The corporation pays its own payroll deposits and estimates only for specified entity taxes. State owner and company payments may also apply.
Corporations · Individuals
If you work for your S corporation and take money or property from it, pay yourself reasonable W-2 wages for your services before treating the rest as distributions. The IRS sets no fixed dollar amount or salary-to-distribution ratio. Use your duties, time, comparable pay, and the source of the corporation's income to support the amount.
Corporations
Before first pay, get the employer EIN and required work-state accounts, collect I-9 and withholding forms, set wages and payday, then calculate and deposit employee withholding and employer taxes; calendar returns, W-2s and new-hire reporting. Sole proprietors, partners and disregarded LLC owners do not pay themselves wages; working corporate owners generally do.
Self-employed · Partnerships · Corporations
Not sure which rules apply?