S-Corp newbie

[wilkie]

Hi

I am new owner of an S-Corp and make a little over 100K yearly. I am planning to take a salary of 42K as the sole employee/officer of the s-corp. my wife also works and we file taxes jointly. We live in PA.

I want to reduce the tax burden and have some questions regarding taxes, retirement plans etc.I am talking to my CPA but he is not giving away much info and I would also like to consult experienced members of this forum.

1) I have not issued myself Jan or Feb salary as the income to corp has not come yet.Can I take Quartely salary?

2) Do I have to make pay stubes and keep it for records or simply write the corp account checks and mention it as salary to me?

3) I get confused by this Monthly Deposits and Quarterly filing of 941. Who will decide whether I should make monthly deposits or quarterly deposits.
Based on monthly salary of $3500, if my total taxes for the quarter less than $2500 then, as an employer/employee,can I make only quartely tax payment along with 941??

4) When do I have to file the Form 940 given my scenario above ?

5) As a W-2 employee till last year I never filed 1040ES. I only filed taxes at the end of the year. As an officer/employee of S-Corp do I HAVE to file 1040ES and make quartely payments towards that?

6) I received EFTPS mailings asking me to activate the same. My CPA says I need not activate that.Can I leave it as per his advice?

7) Is SIMMPLE retirement plan is suitable for me ? I do NOT have any 401(K) plan. What is the max. I can put and is it a pre-tax deduction?

7) I got lot of stuff in my S-Corp kit. Being the only officer(President of the company) Do I have to send the Formal consent of the Corporation's Shareholders electing me as President and send Corporation's minutes any where ?

8) Should I name my wife or any others in the Board Of Directors? Advantages and Disadvantages?Can I pay the director and show it as an expense for S-Corp?

9) Do I have to be ready with Profit/Loss, Balance Sheet etc for every quarter?

I downloaded FreeAccounting software and I have to start recording all the transactions and go to CPA end of this quarter.I am sure I'll have much more to learn once I start doing that.

Thanks in advance for your replies and all the wonderful information from the experienced Gurus of this forum.

Originally Posted by itdomain

1) I have not issued myself Jan or Feb salary as the income to corp has not come yet.Can I take Quartely salary?

Only if the President of the S-corp will sign the check.
You can take your salary any time in any amount you want. Monthly is best but you can take it weekly, quarterly, semi-annually, or even just once a year. It is your choice agreed to by you the employee and you the S-corp president.

Originally Posted by itdomain

2) Do I have to make pay stubes and keep it for records or simply write the corp account checks and mention it as salary to me?

You or someone has to keep a record of the gross and withholdings so you can prepare the payroll tax returns required quarterly and annually. Forms 941,940, W2, state withholding, etc.

Originally Posted by itdomain

3) I get confused by this Monthly Deposits and Quarterly filing of 941. Who will decide whether I should make monthly deposits or quarterly deposits.
Based on monthly salary of $3500, if my total taxes for the quarter less than $2500 then, as an employer/employee,can I make only quartely tax payment along with 941??

The IRS computer decides who is monthly or quarterly depositor based upon your previous years dollar amount reported on form 941. If the payroll taxes (form 941) owed the IRS for the quarter is less than $2500 you can send your check with the form 941 and to hell with what the computer says. However, don't screw-up and owe more or you will get penalties.

Originally Posted by itdomain

4) When do I have to file the Form 940 given my scenario above ?

The form 940 is filed only once a year due not later than Jan 31 following the year. However, the tax owed is required to be paid to the government if in the year 2005 the amount owed exceeds $500. Such payment can be made at your local bank with the appropriate IRS coupon.

Originally Posted by itdomain

5) As a W-2 employee till last year I never filed 1040ES. I only filed taxes at the end of the year. As an officer/employee of S-Corp do I HAVE to file 1040ES and make quartely payments towards that?

No.. not because you are an officer or an employee, but anyone that expects to owe 1040 taxes in excess of $1,000 is required to make estimated tax payments or they will have to pay a penalty for underpayment.

Originally Posted by itdomain

6) I received EFTPS mailings asking me to activate the same. My CPA says I need not activate that.Can I leave it as per his advice?

yes... he is probably a damn good CPA.

Originally Posted by itdomain

7) Is SIMMPLE retirement plan is suitable for me ? I do NOT have any 401(K) plan. What is the max. I can put and is it a pre-tax deduction?

forget SIMMPLE as it is designed for have a minimum retirement plan for employees. Look at a SEP-IRA where you can put away as much as 25% of your W2 gross. SEP is easy to set up by simply filling out form 5305-SEP and giving it to the bank or broker where you want to invest your money. Suggest you contribute to it every payday.

Originally Posted by itdomain

7) I got lot of stuff in my S-Corp kit. Being the only officer(President of the company) Do I have to send the Formal consent of the Corporation's Shareholders electing me as President and send Corporation's minutes any where ?

No, corp minutes are just a record that you keep in your files for documentation. The state may require minutes but there is no federal code requiring corp minutes. However, the federal code requires certain plans be written and that is usually where you do it. If you were borrowing money the bank usually requests a copy of the minutes authorizing you to do that.

Originally Posted by itdomain

8) Should I name my wife or any others in the Board Of Directors? Advantages and Disadvantages?Can I pay the director and show it as an expense for S-Corp?

Disadvantage... do you want her to fire the president? Don't get caught-up in trying to give her money without actual work for the money.

Originally Posted by itdomain

9) Do I have to be ready with Profit/Loss, Balance Sheet etc for every quarter?

No. But it is a good policy.

[wilkie]

The IRS computer decides who is monthly or quarterly depositor based upon your previous years dollar amount reported on form 941. If the payroll taxes (form 941) owed the IRS for the quarter is less than $2500 you can send your check with the form 941 and to hell with what the computer says. However, don't screw-up and owe more or you will get penalties

Oldjack!!! Thanks a lot for your replies.

I'll be sending my very first form-941 some time this month for the 2005 First Quarter. Do you mean I'll be notified whether I have to deposit monthly or quarterly for remaining quarters, based on the first quarter amount?
OR
is it going to be based on my Last years W-2 income ?
In that case I have one more concern. I am taking only half of the salary on W-2 this year from s-corp compared to last year when I had no corporation and I was paid fully on W-2 by my employer. Does it raise any red flags with IRS as far as reasonable W-2 wage from s-corp ? The very reason I registered the s-corp and taking less salary on W-2 is to a) get tax benefits, b) make profit with out all those payroll taxes and c) make more moeny for my family

File Form 941 no later than April 15 -- it is used for payroll from January to March. File it again by July 16 for Payroll in April, May and June. File it again by October 15 for July, August, September... etc.

Even if you don't have wages paid in that quarter, you can just write zero and send it in. If you are paid that quarter, fill it in according to what was paid out.

By default, you are a quarterly depositer. The IRS will notify you if you withhold too much and they want your money monthly, instead of quarterly. Regardless though, they just want the MONEY -- not the form, sooner. To get the money to the IRS, you can sign up for the EFTS program you mentioned -- or there is another form (Jack will know what it is) that you can use to go to a qualified bank (most big banks) and deposit the money.

Form 8109 is a coupon that you fill in the type of tax (941) and the quarter the payment is for (1-4) and the $ being paid with the coupon. The coupon with payment goes to most any bank as they act like a collection agent for the IRS. You can get the coupon book of blank form 8109's by calling the IRS and giving them your S-corp federal ID number and your address.

[wilkie]

Alright. Now I got some insight into things that are done quarterly and at the end of the year and have some questions.

1) Form 941, Quarterly tax payment. If IRS says I need to do monthly deposits then I'll use Form 8109 and make deposits.
2) FUTA tax payments Quarterly and file 940 at the end of the year
3) Cut paycheks Monthly or every quarter
4) File 1040SE, 1120S at the end of the year
5) Do I have to file/pay to the state of PA and local tax every quarter as
S-Corp?

I generate Invoice and get paid bi-weekly. There won't be too many transactions during other times except some expenses.I am wondering what kind of other work is involved in running s-corp ? I think that I can do all this on my own and I want to know what and how CPA does more and adds value to my work. Am I wrong?

Or Is there any standard checklist of list of things that I need to do in addition to what I mentioned above for my situation?

941 is filed quarterly, correct -- if the IRS says pay monthly just use that form 8109 to make the deposits. FUTA tax is paid annually when you file 940.

I dont understand questions 3 & 4, and for 5 -- that depends on your state/locality. Call up the secretary of state and city clerk to find out or a CPA in your state may be able to answer.