I’ve been waiting for my accountant to reply, but I thought I’d ask here while I wait. I started a PLLC this year and haven’t paid myself yet. My accountant mentioned setting up payroll for my S-corp, but nothing has been done so far. I’m really worried about making a mistake with the IRS.
If I transfer money from my business account to my personal account (both accounts are at the same bank, so the transfer will be clear), will this cause any issues once payroll is finally set up?
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If you have an S-corp, you’re required to pay yourself a reasonable salary first. After that, you can take additional money out as distributions.
Not setting up payroll or paying yourself yet is risky because the IRS expects that reasonable salary to be paid before you take other funds out.
@Mica
You can still sort out payroll before the year ends, especially in your first year. It shouldn’t cause major issues with the IRS or your state.
Jude said:
@Mica
You can still sort out payroll before the year ends, especially in your first year. It shouldn’t cause major issues with the IRS or your state.
Completely agree with that.
@Mica
I don’t pay myself monthly or weekly from my S-corp. I usually just take a bonus at the end of the year and handle taxes like any other employee. My accountant says this is fine. Does anyone else have a similar experience?
@Drew
This approach can work, but accountants often don’t recommend it because some people forget to handle things in December. Also, I’ve heard the IRS might crack down on this in the future, but I don’t have a solid source for that.
As long as you label the transfer properly, like ‘Distribution (profits),’ you should be okay.
The IRS isn’t out to get you; they just have rules, and it’s your job to follow them. Once you understand those rules, it’s less stressful.
Yes, you can move money, but here’s the breakdown. A PLLC is a business structure, not a tax classification. Your LLC can be taxed as a sole proprietorship, an S-corp, or a C-corp. You’ll need to choose one before filing taxes.
If you’re taxed as an S-corp, you have to pay yourself a ‘reasonable salary’ as an officer. The IRS doesn’t define ‘reasonable,’ but they’ll check during an audit. This salary includes tax withholdings like Social Security and Medicare.
Any money you take beyond your salary is called a ‘distribution.’ It’s taxed differently and doesn’t include withholdings but is still subject to other taxes.
For single-member LLCs taxed as S-corps, all the money eventually gets taxed as your income anyway. Just make sure you’re handling everything correctly. Good luck!
Glad to help! If you want to dig deeper into small business stuff, check out ‘Thrive Solo’ on Amazon. It’s got a lot of straightforward advice.
S-corp distributions don’t have Social Security or Medicare taxes deducted. Those only apply to your salary.
If your accountant takes forever to answer simple questions, it might be time to find someone else. Tax season will be even more stressful with delays like this.
Seriously, you need a better accountant. The one you have doesn’t seem reliable.
You don’t want to risk making mistakes with taxes.