Does a sole proprietor of an S-corp create a k-1 & 1099 or W2?

[JeffreyR77]

Yes, you can have your wife on payroll in the LLC. 

You cannot just decide to issue her a W2 at year end. 

She would have to have been on payroll and the LLC would have been paying payroll taxes during the year. 

You are also correct, the owner of the LLC does not receive payroll or a W2. 

The LLC is either reporting as a multimember LLC on Form 1065 or on Schedule C on your individual income tax return. 

[Deeter]

Thanks.   LLC Is manager managed, with wife owning 50% of the shares and being a member.

Intention is to report quarterly through EFTPS withholding for taxes for her

and produce a W-2 for her at the end of the year.

I looked at the articles of incorporation and she was not named as an officer there, but is just a 50% owner.

So I'd recognize her as an employee, withhold for taxes and file a W-2 for her at the end of the year.

But no W-2 for myself?

That seems to be what I am reading.

[JeffreyR77]

If you have an LLC where your wife is a 50% member, then the assumption you are also 50%. 

IRS requires you both receive reasonable compensation.  So you both need to be on payroll, and both have payroll tax deductions and receive W2s at year end.

[Deeter]

Yes, I am the other 50% owner.  That is what I figured.  So we both need to do W-2s at the end of the year and have quarterly withholding for both, correct?  Filed through something like EFTPS?

[JeffreyR77]

That is correct.

Publication 535 (2020), Business Expenses (see Test 1 Reasonableness)

[Deeter]

Thanks again all for your assistance.

For my single member LLC, I was wondering about eftps/quartery payments:

https://www.irs.gov/instructions/i941

"

Social security and Medicare tax for 2021.

The rate of social security tax on taxable wages, except for qualified sick leave wages and qualified family leave wages, is 6.2% each for the employer and employee or 12.4% for both. Qualified sick leave wages and qualified family leave wages aren't subject to the employer share of social security tax; therefore, the tax rate on these wages is 6.2%. The social security wage base limit is $142,800.

The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2020. There is no wage base limit for Medicare tax."

So, for SS wages, if you are a single member LLC, and you are the employer and the employee, would you be 12.4%(6.2% + 6.2%) or just 6.2%?

And for medicare, is it 1.45% or 2.90%?

--

Related, for my 2 member LLC, for each quarter, it is 12.4% withholding for SS for each W-2 employee, and 2.90% for medicare, for each, or does it matter at all, just like for the first LLC, that you are the owners?

Thank you,

[JeffreyR77]

You would be paying 12.4% withholding for SS for each W-2 employee, and 2.90% for medicare, for each of you. 

You need to determine what reasonable compensation will be and also your payroll periodicity so you can determine Federal and state (iff applicable) income tax withholding. 

You would add the Federal tax withholding to your deposit of SS and medicare taxes described above,  You also likely have a State unemployment liability you should look into.

[Deeter]

Thank you.

So I'd go to EFTPS and if I have one employee, make a quarterly payment of 12.4% + 2.90% of his income

and for my LLC with two employees, I'd make a quarterly payment of 12.4% + 2.90% of for each of their incomes as a single payment?  

I ask because with form 941 on there, you just make a single payment, regardless of amount of employees.

Finally, for the federal income tax, what percentage do you do for someone who makes $3,000 per quarter?

[ColeenD3]

Yes. One payment for all employees. The IRS provides a LINK to assist you with your withholding calculations.