@lung ho wrote:
I owned the a nail shop, but I don’t work there, my wife works and manages everything. I just do the number. do I have to pay myself as an officer ? or can I pay my wife as an officer and not paying me?
thanks.
Here is an article on compensation for officer-employees (officers who also provide services, this is your wife.)
https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...
Your wife must take a fair salary for the work she performs (doing nails, managing, etc.) What does "do the number" mean? Do you do the accounting for the business? That is also work. If you didn't do it, you or your wife would probably have to hire a bookkeeper or accountant, right? What would you have to pay that person to keep your books? That would be your salary for keeping the books. Salaries are reported on a W-2 and are subject to withholding of federal income tax, state income tax, and social security and medicare tax. It's ok to pay the salary weekly, or monthly, or quarterly, or even yearly, as long as it represents a fair market value for the work being performed.
Can an officer who does no work be paid a salary? I don't think so. Officers who own shares in the company but perform no work are compensated by dividends or profit sharing, but the profit-sharing only happens after any employee who perform work get paid their wages or salary.
It sounds like your wife should be paid a relatively large salary for doing nails and managing the salon. You might be paid a modest salary as bookkeeper for the business, if I understood you correctly. If the business has profits after paying salaries, the profits can be distributed to the shareholders according to the number of shares they own.
@Anonymous_
@AmeliesUncle
Do you have further thoughts for this taxpayer?
