Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
cjprizes
New Member

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Can part of the compensation of the Corporation officer be reported in another way as to avoid paying some of the payroll taxes?

1 Best answer

Accepted Solutions
tagteam
Level 15

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Did you read through the following thread?

 

https://ttlc.intuit.com/community/business-taxes/discussion/filing-first-corporation-tax/01/1695794

 

Your return is late at this point and you really do need a tax professional.

View solution in original post

17 Replies
RichardK
New Member

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Yes, according to the IRS website (Paying Yourself), "An officer of a corporation is generally an employee, but an officer who performs no services or only minor services, and who neither receives nor is entitled to receive any pay, is not considered an employee."

Therefore, if the Officer receives compensation it is subject to employee payroll taxes.

However, unlike an S corporation, shareholders and officers are not required to be paid a reasonable minimum compensation. 

ZJZ
Returning Member

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Hi, What if for a one-member c corp? Does the owner subject to w2 reasonable compensation which the c corp has no other employee?

ThomasM125
Employee Tax Expert

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

As an officer/shareholder/owner of the corporation, you are required to pay yourself a reasonable wage if you are materially involved with the management or activities of the company.

 

Since it appears that you are running the business by yourself, you would have to pay yourself a salary, taking into consideration things like the net profit of the business and how much you distributed to yourself from the business in the current year.

 

If you are a C corporation, monies you withdraw from income that you do not report as compensation, either on a W-2 form or 1099-MISC, would be considered dividends and would taxable to you as such, but not deductible by the corporation. So, you would be doubled taxed on your distributions.

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
ZJZ
Returning Member

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Thanks for the reply.One more followup question. Can I distribute the money as a dividend only without any compensation?

tagteam
Level 15

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

@ZJZ Unlike S corporations where the issue of being under compensated can arise, it is the opposite with C corporations; the focus is on over compensation since dividends are not deductible but salary and wages are deductible.

 

See https://www.journalofaccountancy.com/issues/2013/sep/20137412.html

cbfreeze
Returning Member

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

I am the sole owner of a C Corp and I run the corporation on my own. Do I need to put officer compensation? This is my first year therefore no payroll taxes were filed during the year as I was not aware of how the officer compensation works. Can I pay myself through 1099-MISC rather than a W2?

 

Since i did not do payroll taxes, what is the way to report any income to myself?

KristinaK
Employee Tax Expert

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

You have several options:

 

1) Calculate your reasonable salary and run the payroll for 2019 (filing Forms 94x, W-2, etc.). This will be messy and will mean penalties on late filing and payment of taxes. 

2) You can issue yourself a 1099-MISC, report it on Schedule C of your personal return. This is not an ideal way of doing it. And really not the right way of doing it. 

3) You can consider the payments to yourself as payment of dividends and report them as such. Or return of capital. Read more about it here.  Without the salary, also not an ideal way to go.

 

If you did not pay yourself a compensation through payroll, you will not report anything on the line for "officer compensation". 

AmeliesUncle
Level 12

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?


@cbfreeze wrote:

I am the sole owner of a C Corp and I run the corporation on my own.

 


You REALLY, REALLY need to be going to a good tax professional for the corporate return.  

Rick23slash
Level 2

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Hello there, as an employee/ shareholder of my corporation which started conducting business in Sep. 2019. What if I did not run payroll to pay myself a salary and did not issue myself a distribution, can I exclude them on my return or how can I fix this? I have a first year operating loss.

tagteam
Level 15

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Did you read through the following thread?

 

https://ttlc.intuit.com/community/business-taxes/discussion/filing-first-corporation-tax/01/1695794

 

Your return is late at this point and you really do need a tax professional.

View solution in original post

mkzang
Level 1

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Are there any members of a c corp or s corp that are not considered employees that can be paid dividends??

Anonymous
Not applicable

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

any stockholder of an S-corp or C-corp can be paid dividends even if they are not employees.  there is one caveat. the payments must be in portion to the stock holdings.  so if shareholder A holds 100 shares and is paid a dividend of $50 every other shareholder must be paid the same 50 cents per share dividend.  it is crucial on an S-corp.  paying different amounts to different shareholders that are not in proportion to shareholdings would indicate there is a second class of stock which would result in termination of S-Corp status.  An S-corp can have multiple classes of stock with strict limitations.  every class must have the same rights to distributions and liquidation proceeds. 

Treasury Regulations (“Regulation”) § 1.1361-1(l) provides rules interpreting the one class of stock requirement. In general, a corporation does not have an impermissible class of stock if all of its outstanding shares of stock confer identical rights to distribution and liquidation proceeds (“Proportionate Distributions”). However, as mentioned above, the foregoing does not preclude differences in voting and other rights between outstanding shares of stock. As long as the Proportionate Distributions standard is satisfied, a corporation may have voting and nonvoting shares of stock, a class of stock that may vote only on certain issues, irrevocable proxy agreements, or groups of shares that differ with respect to rights to elect members of the board of directors (or managers in the case of a limited liability company).

 

 

there are also state laws that may cause legal issues with nonproportional distributions.  in one case a C-Corp wanted to liquidate. it was found that some shareholders were paid but others were not. it could not liquidate until it paid those unpaid dividends to the proper shareholders. to those, it could not find the amount unpaid had to be turned over to the state to hold (escheat) as unclaimed property.  this was very expensive for the corp because the non-payments went back about 20 years. so the records for those years had to be obtained and then the numbers reconciled. 

 

as to what the IRS could do with disproportionate distributions is take the position that the proportionate amounts were dividends but anything else was compensation and then it hits the corp for unpaid payroll taxes, penalties and interest. this could be done to either a C or S-corp. in addition the IRS would change the S to a C-corp and then all its income is subject to income taxes.   

 

 

Does an officer of a corporation have to report all compensation for payroll tax purposes?   it depends on how you define compensation.   salary - yes, reimbursement under an accountable plan - no, pay officer's personal expenses that are expensed on corp books -  yes.  what if set up as a loan - well then the officer should pay back promptly. nonpayment, if caught by the IRS, could be deemed compensation. dividends - no but it could be compensation if disproportionate.    on a S-corp any medical insurance paid by the Corp for a  s/h or s/h family holding more than 2% of stock must be added to the W-2. if not it's a non-deductible expense. 

 

if a shareholder performs no services for the Corp then they are not an employee. 

mkzang
Level 1

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Thanks so much. You answered so many questions. I have just a few more. If there is a shareholder that isnt a employee, can they receive a loan if it is paid back before the end of year? Also how would this be declared on their personal taxes? and is there a limit to the loan amount

tagteam
Level 15

Does a officer of a C Corporation have to report all compensation for payroll tax purposes? Or can a officer receive other forms of compensation?

Yes, a loan can be made to a shareholder who is not an employee, but it must be a bona fide loan and not a disguised dividend (or distribution).

 

Actually, such loans from corporations to shareholders are considered assets and the size of the loan, and other details (such as charging interest at the market rate), can become complicated so professional guidance is recommended.

Dynamic AdsDynamic Ads
Privacy Settings
v