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Level 2
June 3, 2019
Question

If I have not paid any withholding tax, should I enter zero for both SS and Medicare if I'm the only employee of a S Corp. and need to issue myself a w-2?

  • June 3, 2019
  • 8 replies
  • 71 views

This is the first time I've needed to take a "reasonable salary" with my business and I'm creating my w-2 using Turbo Tax Business Quick Employer Forms.  Since I've not yet paid any SS or Medicare taxes I entered zero but it responds with a audit warning prompt. Can I submit my w-2 with zero's for SS and Medicare? 

8 replies

June 3, 2019

No. Since the IRS is a pay as you go system, you would need to make payments and take deduction as the year goes on, not the following year. You need to do this on a quarterly basis.

Federal law requires you, as an employer, to withhold certain taxes from your employees' pay. Each time you pay wages, you must withhold – or take out of your employees' pay – certain amounts for federal income tax, social security tax, and Medicare tax. You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Under the withholding system, taxes withheld from your employees are credited to your employees in payment of their tax liabilities. Federal law also requires you to pay any liability for the employer's portion of social security and Medicare taxes. This portion of social security and Medicare taxes isn't withheld from employees. 

Use Form 941 to report the following amounts. 

  • Wages you’ve paid. 
  • Tips your employees reported to you. 
  • Federal income tax you withheld. 
  • Both the employer's and the employee's share of social security and Medicare taxes.
  •  Additional Medicare Tax withheld from employees. 
  • Current quarter's adjustments to social security and Medicare taxes for fractions of cents, sick pay, tips, and group-term life insurance. 
  • Qualified small business payroll tax credit for increasing research activities. 

Don't use Form 941 to report backup withholding or income tax withholding on nonpayroll payments such as pensions, annuities, and gambling winnings. Report these types of withholding on Form 945, Annual Return of Withheld Federal Income Tax. After you file your first Form 941, you must file a return for each quarter, even if you have no taxes to report, unless you filed a final return or one of the exceptions listed next applies. 

https://www.irs.gov/pub/irs-pdf/i941.pdf

(See the attached screenshot below. Click to enlarge.)

Level 2
June 3, 2019
Thank you for your response but my question relates to last year, 2017 taxes.  To be clear, I am a one person S-Corp and for the first time I took a salary for myself but I mistakenly did not withhold any SS or Medicare last year (I will be moving forward in 2018).  Should I issue myself a W-2 and enter zero for both SS and Medicare?  The Turbo Tax Business software flags a "zero" entry as a potential audit issue. Do I need to file any additional forms?