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General Accounting Discussions: FUTA SUTA and one man S Corp

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  1.  
    • CommentAuthormikeo56
    • CommentTimeJul 6th 2008
     
    Does a single man S corp have to pay unemployment tax? The language of the "law" implies that there must be an employee employer relationship. IRS rules say that a working corporate officer must be compensated and is possibly considered to be an employee even though he is the only one in his company. Does anyone know what the current practice is for this specific arrangement?

    Thanks, Mike
  2.  
    The sole owner of the S corporation is considered an employee and as such some salary should be reported on a W-2 with taxes withheld for withholding, FICA and Medicare. In addition there would be payroll taxes due from the corporation for state and federal unemployment taxes.

    The IRS is currently cracking down on the under reporting of salary by the owner and the over reporting of corporate profit. This practice has the effect of cutting the amount of FICA and Medicare taxes that would be due on the amount of salary declared.

    There are many ways in fact to hold down the salary and that should be a discussion between you and your accountant.

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