What is a “shareholder employee” in an S Corporation?
Posted 11.30.2020 in Taxes
Congratulations, you now have an S Corporation. Are you an employee? This is an important question for the IRS that has tax implications. If you are a “performing shareholder” (i.e. you make it happen), you must be paid as an employee. A shareholder does not qualify as an independent contractor or receive a 1099 from a corporation in which they have ownership. How do you determine if you are an employee in an S Corporation? Ask yourself these questions:
- Do you sell a product or service?
- Do you manage the website?
- Do you perform data entry in QuickBooks?
- Do you make or deliver a product?
- Do you engage in a service?
If you answered “yes” to any of these questions, then you are most likely an employee.
GREAT! Now you need payroll services, you need to pay employees, you need to withhold taxes from the employees, you need to remit employer taxes and employee withholding and you need to file quarterly taxes with the federal, state, and sometimes local governments.
If you are the only employee, which is frequently the case in very small businesses, Attaway Linville offers a “single shareholder payroll” product that can solve all of these reporting and compliance issues. Interested in learning more about how to simplify your payroll process? Please contact Attaway Linville today at 803-831-0263 or 404-607-8400 to learn more about how we can help.