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What Is The Best Way To Pay Myself In My Business? January 17, 2010

Posted by Julie Duriga, CPA in Uncategorized.
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I am grateful to have had lunch with my friend Barbara last Thursday.  I met Barbara about three years ago and I am so grateful she is my friend.   I met Barbara because I was starting my CPA practice and I was looking for a payroll solution for all of my potential clients that I was going to have.  Barbara works for PayChex.

I have since sold my practice and I am astonished everyday at how many people still want to be my friend.  I thought many friends would vanish once I was no longer working in public accounting, this has proven not to be true.  Barbara is someone who has stuck with me through thick and thin and has done an amazing job in Western North Carolina providing businesses with payroll services.

Barbara told me at lunch on Thursday that S Corporation payroll through PayChex is $39.99 per month.  I just about fell out of my chair.  This is a unbelieavable deal for payroll.

I believe running payroll through PayChex will help small businesses stay out of trouble with the IRS.  Using PayChex for your payroll will keep you disciplined inside your S Corporation to make sure you pay yourself.   Not providing compensation to active officers inside an S Corporation is a HUGE red flag for the IRS.  Even if it is a small amount every month, it keeps the zero out of a box where the IRS likes to see an amount.  Remember, to run one paycheck carries with it the same burdens as running fifty checks.  There is really no such thing as “but is just one paycheck”.

I believe PayChex by offering payroll services for $39.99 is offering America its own economic re-investment recovery act.

I am not compensated by PayChex in any way except that Barbara takes me out to lunch about once every quarter.  I am passionate about small businesses and believe that small business owners are the true heroes of our economy.  I see this as a fundamental service that will free small business owners up to do what they love to do!  Worrying about payroll is silly when it is so affordable and so well done byPaychex.

Visit us at our website to get your free E-Book titled “How Do I Pay Myself? The Entrepreneur’s Guide to Building a Business AND Bringing Home the Dough.”  www.UniversityForBusiness.com

We also offer a really cool twenty minute video about how running your business affects your bottom line. We use islands, cars and bridges to demonstrate the movement of profits and losses between your personal and business bank accounts. This immediate download is avaialble for only $6.99. Twenty minutes with a CPA for only $6.99, what a deal!

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Requirements For Officer Compensation…. December 13, 2009

Posted by Julie Duriga, CPA in Uncategorized.
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This was a question that a blog reader asked me.  It is so useful when readers ask questions because it gives me material to write about.  So keep your questions coming.

I usually suggest that active officers run payroll on themselves at a minimum once a quarter.  Even if the business can only afford to pay the officers through payroll $500.00 per quarter, that is better than nothing.  This makes the business look more like a “going concern” (a real business that is sustainable) to the IRS than if there is an absence of payroll inside the corporation for its active officers.  The IRS starts to wonder why would the officers stay in this business if the business can’t afford to pay its own officers after a period of time. 

The only requirement that I know of is that officers must be compensated by giving them a reasonable salary for your industry.  If your S Corporation is a restaurant, then the business must compensate the officers who work inside the restaurant a reasonable salary for the restaurant industry.

What is an active officer?  This is an officer who works inside the corporation.  An officer who reviews the financials on a weekly basis or an officer who actively generates sales calls or an officer who does the dishes is considered active.  If the business has officers who show up every now and then for board meetings or who stops by occasionally to check on their investment is not considered active.

In my state of North Carolina, the power of the payroll law rests with the employer.  The employer can really do whatever they want to do with their employees as far as paying frequency.   I don’t know of any employer that pays its employees less than once a month.   Check with your state department of revenue for your state’s payroll laws.

Officers can be compensated on a different schedule than its employees.  Sometimes when there is no money, the employees get paid first and the officers just have to wait.  Of course, it is easier to run payroll all at the same time, but sometimes this is not possible.

 In conclusion, the officers can be compensated whenever the Corporation deems appropriate.  At at minimum, the compensation should occur at least once a quarter.  The IRS requires that active officers be compensated a fair and reasonable salary.  Employees and officers can be compensated on the same schedule if the funds permit this.  Be careful of paying your officers with fringe benefits.  Fringe benefits to S Corporation officers are usually considered compensation by the IRS and have to be added to the W-2 as taxable wages.

Visit us at our website to get your free E-Book titled “How Do I Pay Myself? The Entrepreneur’s Guide to Building a Business AND Bringing Home the Dough.”  www.UniversityForBusiness.com

We also offer a really cool twenty minute video about how running your business affects your bottom line. We use islands, cars and bridges to demonstrate the movement of profits and losses between your personal and business bank accounts. This immediate download is avaialble for only $6.99. Twenty minutes with a CPA for only $6.99, what a deal!