I have an LLC with my wife and I as the equal partners. I have also elected to be treated as an S-Corp that started business in March of 2019. I am new to all this so I figured I will file everything when the time comes. I did not know that I should be providing W2s for each of us as we are supporting this business. I have not withheld any taxes, but now I have to create a W2 for myself and my wife for the S-Corp. We also have another job, where we have been getting W2s and withholding taxes.
My question is that can I create W2s with 0 federal withholding?
Thanks
yes on withholding, but you can not avoid FICA and Medicare taxes on the wages. I strongly suggest you use a pro the first year. the pro can also give you an idea of what your wages can be to satisfy the IRS. to high and the deduction will be disallowed. to low and the IRS could impute higher salaries which would result in substantial penalties. the iRS says reasonable comp but there is no definition in the code and the tax courts are not in agreement. there may be other items that need special treatment and your lack of knowledge of tax laws for an S Corp puts you at a disadvantage and possible exposure to penalties and interest and loss of some deductions if not dome properly. the pro can also give you insight into record keeping requirements.
yes on withholding, but you can not avoid FICA and Medicare taxes on the wages. I strongly suggest you use a pro the first year. the pro can also give you an idea of what your wages can be to satisfy the IRS. to high and the deduction will be disallowed. to low and the IRS could impute higher salaries which would result in substantial penalties. the iRS says reasonable comp but there is no definition in the code and the tax courts are not in agreement. there may be other items that need special treatment and your lack of knowledge of tax laws for an S Corp puts you at a disadvantage and possible exposure to penalties and interest and loss of some deductions if not dome properly. the pro can also give you insight into record keeping requirements.
Thank you for your reply.
When you are talking about pro version, are you talking about quickbooks pro for Desktop? I am currently using Turbo Tax for Business.
Thank you