Payroll Expense for a very small S-Corp

 

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Payroll Expense for a very small S-Corp

Good Afternoon Everyone,

So, here’s my situation. Perhaps this is elementary for some of you but I need clarification. I am a 1099 contractor for a small psychotherapy practice. Each therapist needs to create their own business entity. I opted for an s-corp. Technically, I am a Statutory Closed Corporation in the State of Wisconsin and am the only member/shareholder of this S-corp. I set up a business checking account and any amount I bring in from insurance gets deposited into the business account on a weekly basis. I then take draws from this account and transfer it to my personal checking account every Friday. It’s never the full amount and I pay myself a reasonable salary for a therapist in my market. The amount that I transfer from my business checking account would be a payroll expense for the S-corp – correct?

Payroll Expense for a very small S-Corp

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One Reply to “Payroll Expense for a very small S-Corp”

  1. I think most people would book it as a payroll expense if you are really treating it like payroll (i.e., deducting taxes, paying payroll taxes, etc.)

    I also would like to know why you “need” to create a business entity. It sounds like you may be better off without a formal LLC.

    At the end of the year, any net taxable income of the LLC passes through to your personal income tax returns as regular income (due to your S-Corp election). If you are just transferring money to yourself without doing “payroll” then the payments would be booked as an Owner Draw.

    People make much ado about S-Corp tax treatment. The reality is that it doesn’t really come into play until you are making enough to pay yourself a “reasonable” wage and still have leftover income. At that point you can classify the extra income as a dividend to yourself, which cuts-out the self-employment tax.

    If this all sounds like incomprehensible to you, and it might, then you should consult with a tax preparer, CPA, or tax attorney in your area.

    ​

    Good luck, HTH

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