In the previous post, I shared that owners of an S Corp have to receive a reasonable amount of compensation (payroll) before drawing money.
How do you run payroll for yourself??
Running payroll is more complex than just drawing money out of the business.
It is not just changing the categorization of the transaction from owner’s draw/distribution to salaries.
There are more things to be considered with payroll.
For example, employee tax will need to be deducted.
Employer tax will need to be accrued and paid.
At the end of the year, W-2 will need to be issued.
Because of all the calculations, payroll tax payments, and filings, 100% of the time, I recommend investing in payroll software.
There are many payroll providers out there: QuickBooks, Gusto, ADP and so many other options.
Using payroll software comes with many benefits.
They often provide automatic payroll (so you don’t have to log in or click anything to run payroll).
Payroll tax for employee and employer portions is calculated and can be paid automatically.
W-2 can just be downloaded.
All the headaches around payroll will be gone.
Yes, there is a fee, but that investment will save you time and stress, and the fee will be deductible for taxes 🙂
