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Subject Author Date
Pay Dividend to Employee with Federal Tax Witholding and no FICA Fred Marshall 10-08-2007
Posted by Fred Marshall on October 8, 2007, 5:54 pm
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 I have a small company with myself as an employee.
So, there are paychecks to me / SSN / etc.

Normal paychecks have FWH, FICA, etc.

If the company has a profit for 1 quarter, I'd like to issue a dividend that
will go 100% to FWH to cover the tax for that quarter. I'd like to deposit
it using Tax Deposit 8109 form - and no FICA for a dividend.

If I do a regular paycheck then it will calculate FICA, etc.

All I want is to make the FWH deposit wuthout increasing salary paid, FICA,
etc.

How might I prepare a check to do that - and to not mess up the payroll
records?

Thanks,

Fred



Posted by Allan Martin on October 9, 2007, 9:36 am
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>I have a small company with myself as an employee.
> So, there are paychecks to me / SSN / etc.
>
> Normal paychecks have FWH, FICA, etc.
>
> If the company has a profit for 1 quarter, I'd like to issue a dividend
> that will go 100% to FWH to cover the tax for that quarter. I'd like to
> deposit it using Tax Deposit 8109 form - and no FICA for a dividend.

Make a personal estimated tax deposit using form 1040 ES. Also make it a
habit of consulting with your accountant, especially on the topic of what
constitutes a reasonable salary.


>
> If I do a regular paycheck then it will calculate FICA, etc.
>
> All I want is to make the FWH deposit wuthout increasing salary paid,
> FICA, etc.
>
> How might I prepare a check to do that - and to not mess up the payroll
> records?
>
> Thanks,
>
> Fred
>


Posted by Allan Martin on October 9, 2007, 9:40 am
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>
>>I have a small company with myself as an employee.
>> So, there are paychecks to me / SSN / etc.
>>
>> Normal paychecks have FWH, FICA, etc.
>>
>> If the company has a profit for 1 quarter, I'd like to issue a dividend
>> that will go 100% to FWH to cover the tax for that quarter. I'd like to
>> deposit it using Tax Deposit 8109 form - and no FICA for a dividend.
>
> Make a personal estimated tax deposit using form 1040 ES. Also make it a
> habit of consulting with your accountant, especially on the topic of what
> constitutes a reasonable salary.

Just noticed that you said 1st quarter. Can we assume your company is a C
corp with a fiscal calandar starting July 1st? If so then reasonable salary
is not in play here.


>
>
>>
>> If I do a regular paycheck then it will calculate FICA, etc.
>>
>> All I want is to make the FWH deposit wuthout increasing salary paid,
>> FICA, etc.
>>
>> How might I prepare a check to do that - and to not mess up the payroll
>> records?
>>
>> Thanks,
>>
>> Fred
>>
>


Posted by Scott on October 9, 2007, 4:19 pm
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>I have a small company with myself as an employee.
> So, there are paychecks to me / SSN / etc.
>
> Normal paychecks have FWH, FICA, etc.
>
> If the company has a profit for 1 quarter, I'd like to issue a dividend
> that will go 100% to FWH to cover the tax for that quarter. I'd like to
> deposit it using Tax Deposit 8109 form - and no FICA for a dividend.
>
> If I do a regular paycheck then it will calculate FICA, etc.
>
> All I want is to make the FWH deposit wuthout increasing salary paid,
> FICA, etc.
>
> How might I prepare a check to do that - and to not mess up the payroll
> records?
>
> Thanks,
>
> Fred
>

Depends on if this is a C or an S corporation. For either, if you wish to
treat it as additional payroll, you'll have to take out for FICA as well as
FWT. If you want to simply pay the estimated tax, I'd do as Allan suggests &
pay the 1040ES through the company using a regular check (not payroll)
payable to US Treasury, and charge it to Dividends or Owners Draw depending
on the type of corporation.

You may be able to eliminate the need for separate 1040ES payments by
incorporating the payment into your regular FWT withholding. Just divide the
quarterly or annual payment amount by the number of paychecks for the period
& enter that as additional amount to be withheld for FWT (in your payroll
tax profile). I've been doing this for years for my S corp & it's much
easier than filing the 1040ES, also eliminates a big $ hit each quarter -
money is sent in along with the tax deposit as you wanted.

Scott out.



Posted by Fred Marshall on October 13, 2007, 8:08 pm
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>>I have a small company with myself as an employee.
>> So, there are paychecks to me / SSN / etc.
>>
>> Normal paychecks have FWH, FICA, etc.
>>
>> If the company has a profit for 1 quarter, I'd like to issue a dividend
>> that will go 100% to FWH to cover the tax for that quarter. I'd like to
>> deposit it using Tax Deposit 8109 form - and no FICA for a dividend.
>>
>> If I do a regular paycheck then it will calculate FICA, etc.
>>
>> All I want is to make the FWH deposit wuthout increasing salary paid,
>> FICA, etc.
>>
>> How might I prepare a check to do that - and to not mess up the payroll
>> records?
>>
>> Thanks,
>>
>> Fred
>>
>
> Depends on if this is a C or an S corporation. For either, if you wish to
> treat it as additional payroll, you'll have to take out for FICA as well
> as FWT. If you want to simply pay the estimated tax, I'd do as Allan
> suggests & pay the 1040ES through the company using a regular check (not
> payroll) payable to US Treasury, and charge it to Dividends or Owners Draw
> depending on the type of corporation.
>
> You may be able to eliminate the need for separate 1040ES payments by
> incorporating the payment into your regular FWT withholding. Just divide
> the quarterly or annual payment amount by the number of paychecks for the
> period & enter that as additional amount to be withheld for FWT (in your
> payroll tax profile). I've been doing this for years for my S corp & it's
> much easier than filing the 1040ES, also eliminates a big $ hit each
> quarter - money is sent in along with the tax deposit as you wanted.
>
> Scott out.


Thanks to all. It's an S corp. Scott, yes this last item is pretty much
what I want to do. The question really is HOW to "incorporate the payment
into your regular FWT" without it coming out of a salary amount that carries
FICA? I don't see how that's possible.

Yes, my accountant has advised on the suitable salary...

Fred



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