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Old 06-07-2017, 11:07 AM
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Question regarding withholdings on an S Corporation

Good Morning Everyone,

As a newly formed S-Corporation (FL), after being a Sole Proprietor for a few years and deciding it was time to incorporate, I just have a quick question in regards to the Employee/Employer Withholdings. I am also partnered up with a Payroll company to handle all payroll and state/fed taxes and necessary withholdings. I am both 100% owner, and the only employee.

As an employee, I just processed my first payroll of $1800.00.

On that payroll, I had the following employee withholdings:

- Social Security ($111.60)
- Medicare ($26.10)
- Fed Income Tax ($202.40)
Total: $340.10

On the Employer side, I had the following liabilities:

- Social Security ($111.60)
- Medicare ($26.10)
- Fed Unemployment ($10.80)
- FL Unemployment ($48.60)
Total: $197.10

I understand all these withholdings and state/fed requirements, what I don't understand is at first, it appears that the company will only be liable for the $197.10, however, after speaking with my payroll company when I realized the business was being deducted a total of $537.20, they informed me the company is not just for the $197.10, but AS WELL for the $340.10 on the employee withholdings.

They explained it to me two times, but I am still not 100% clear on why if the $340.10 employee holdings are coming out of my payroll (gross pay) why are they as well being deducted from the company?

Thank you in advance for any/all responses in assisting me to better understand this process. I am simply new to this process and want to ensure I understand every aspect of my business as much as possible.



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Old 06-07-2017, 09:17 PM
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Originally Posted by MDelgado17 View Post

They explained it to me two times, but I am still not 100% clear on why if the $340.10 employee holdings are coming out of my payroll (gross pay) why are they as well being deducted from the company?

.
As an S corp shareholder/employee, you must have social security and Medicare taxes withheld from your salary just like any regular employee.
The S corp must then match the amount of social security and Medicare taxes withheld from your gross pay.



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Old 06-07-2017, 09:21 PM
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I understand this, but that is included in the Employer Liability portion of $197.10 already. So in addition to that, I am as well being deducted the $340.10 for a total of $537.20 being paid out by the company.

What I don't understand is why the $340.10 is being deducted from the company end as well when it is already being deducted from my gross pay on the employee side. Unless there's (obviously) something I'm simply missing here.



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Old 06-07-2017, 09:22 PM
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Originally Posted by Wnhough View Post
As an S corp shareholder/employee, you must have social security and Medicare taxes withheld from your salary just like any regular employee.
The S corp must then match the amount of social security and Medicare taxes withheld from your gross pay.
I understand this, but that is included in the Employer Liability portion of $197.10 already. So in addition to that, I am as well being deducted the $340.10 for a total of $537.20 being paid out by the company.

What I don't understand is why the $340.10 is being deducted from the company end as well when it is already being deducted from my gross pay on the employee side. Unless there's (obviously) something I'm simply missing here.



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Old 06-08-2017, 02:50 AM
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Originally Posted by MDelgado17 View Post
I understand this, but that is included in the Employer Liability portion of $197.10 already. So in addition to that, I am as well being deducted the $340.10 for a total of $537.20 being paid out by the company.

What I don't understand is why the $340.10 is being deducted from the company end as well when it is already being deducted from my gross pay on the employee side. Unless there's (obviously) something I'm simply missing here.
I understand all these withholdings and state/fed requirements, what I don't understand is at first, it appears that the company will only be liable for the $197.10, however, after speaking with my payroll company when I realized the business was being deducted a total of $537.20, they informed me the company is not just for the $197.10, but AS WELL for the $340.10 on the employee withholdings.=====> An S corp, like any other business, must pay FICA taxes on behalf of its employees, you. The obligation for Social Security and Medicare taxes is divided equally between the employees and the employer, the S corp. In most cases, you pay 6.2 percent of youir wages in Social Security taxes and 1.45 percent in Medicare taxes, for a total of 7.65 percent. The employer, the S corp, then pays an equal amount , another 7.65 %, out of its own pocket. it's typically the employer's(the S corp ) responsibility to collect "both sides" of these taxes and send them to the government, it can only claim a deduction for the taxes it pays out of its own pocket.



I understand this, but that is included in the Employer Liability portion of $197.10 already.=>Correct OK.

So in addition to that, I am as well being deducted the $340.10 for a total of $537.20 being paid out by the company.What I don't understand is why the $340.10 is being deducted from the company end as well when it is already being deducted from my gross pay on the employee side. Unless there's (obviously) something I'm simply missing here.==========>>as mentioned abov



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Old 06-17-2017, 10:15 PM
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Point of view

It seems you are confused because you are looking at it from the company side only.
Imagine if you worked for GE.
Out of your 1800$ pay they would deduct 340 every check and give to the government. But they would also give the government another 197 out of their pocket for your SS.
As a solo owner you get it taken out as the employee but as the owner you pay 197 to the government on behalf of the employee- you.
I'm not a tax guy but that is my interpretation.
But if they don't go broke you'll get it back someday, maybe



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Old 06-17-2017, 11:17 PM
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Originally Posted by Msmit View Post
It seems you are confused because you are looking at it from the company side only.
Imagine if you worked for GE.
Out of your 1800$ pay they would deduct 340 every check and give to the government. But they would also give the government another 197 out of their pocket for your SS.
As a solo owner you get it taken out as the employee but as the owner you pay 197 to the government on behalf of the employee- you.
I'm not a tax guy but that is my interpretation.
But if they don't go broke you'll get it back someday, maybe
Correct;Your S Corp withholds an employee?s federal tax, Social Security and Medicare taxes. So, that?s the employee?s gross pay you?re withholdingYour corp pays a 7.65% Social Security and Medicare payroll taxYou (the employee) also need to pay a 7.65% payroll tax as an employee;As is the case for any other corp, the FICA tax is imposed only with respect to employee wages and not on distributive shares of shareholders. Although FICA tax is not owed on distributive shares, the IRS and equivalent state revenue agencies may recategorize distributions paid to shareholder-employees as wages if shareholder-employees are not paid a reasonable wage for the services they perform in their positions within the company.



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