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Old 02-22-2018, 05:21 PM
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Payroll question

I did not see a category for Partnership, this would not be an LLC.
I have had conflicting answers regarding this question so I hope someone can set me straight.
My cpa told me that I can put myself and my partner on payroll and only pay taxes like normal withholding rather than paying taxes on the business profit.
Normally to my knowledge, it goes like this example:
Company makes 100,000 after expenses, form 1065 is filed and then a K1 Schedule is filed for each partner. Since it is 50/50 split then each partners profit is 50,000 each and taxes are paid on those amounts regardless of whether they have that in the bank. Correct?

My CPA is telling me that I can put myself and my partner on payroll like if I was employed by my own company and only deal with taxes on that.
As an example:
100,000 made by company, each partner on payroll would make 12,500 year end and would have been paying taxes on that only which obviously is 25,000 combined leaving 75,000 that would not be taxed?
Is this right?
Reason for this is that I dont need all the extra money from the business, i can survive perfectly fine with a certain wage at this point in my life. I rather the bank keep growing until I retire or expand.
But, everything else I read tells me I CANNOT pay myself as an owner like a w-2 type of employee.

I have other questions.



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Old 02-23-2018, 02:39 AM
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Join Date: Oct 2010
Posts: 5,090
I did not see a category for Partnership, this would not be an LLC.
I have had conflicting answers regarding this question so I hope someone can set me straight.
My cpa told me that I can put myself and my partner on payroll and only pay taxes like normal withholding rather than paying taxes on the business profit.
Normally to my knowledge, it goes like this example:
Company makes 100,000 after expenses, form 1065 is filed and then a K1 Schedule is filed for each partner. Since it is 50/50 split then each partners profit is 50,000 each and taxes are paid on those amounts regardless of whether they have that in the bank. Correct?======>Correct UNLESS the MMLLC Filing as a S or C Corp ; as you sid say the MMLLC ?s net profit on form 1965 is $100K then , 50% of the income is reported in each of the two members? Sch K1 of 1065; The MMLLC must also submit a copy of Sch K-1 to the IRS for each member.


My CPA is telling me that I can put myself and my partner on payroll like if I was employed by my own company and only deal with taxes on that.
As an example:
100,000 made by company, each partner on payroll would make 12,500 year end and would have been paying taxes on that only which obviously is 25,000 combined leaving 75,000 that would not be taxed?
Is this right?=====>You mean you are treated as a regular W2 employee by the MMLLC?? I do not think so; I guess this is what many IRS Enrolled Agents/CPAs make mistakes and give inaccurate tax advices;
Reason for this is that I dont need all the extra money from the business, i can survive perfectly fine with a certain wage at this point in my life. I rather the bank keep growing until I retire or expand. The members of a MMLLC generally can't be paid wages, so they won't receive W-2 income -- with one exception; A MMLLC can deduct its employees' wages as a business expense, reducing the company's taxable profit. The members of the MMLLC, however, aren't employees of the business and therefore can't be paid wages -- sometimes called "W-2 income" after the federal form that reports such pay. The exception is when the MMLLC chooses to be treated as a corp for tax purposes Limited liability companies are set up under state laws rather than federal laws. As a result, the IRS doesn't recognize the LLC as a distinct form of business. If the LLC has two or more members, the IRS taxes it as a partnership. For MMLLCs that haven't requested to be treated as corps, the tax rules for partnerships apply. Members/partners of a partnership are not employees and cannot receive W-2 income. Instead, all the company's profits are taxed as personal income to the partners; each partner is allocated a share of the profits based on his ownership interest in the company. All partners must pay income taxes on their share of the profit; those who actively work for the company must treat their share of the profit as self-employment income.


But, everything else I read tells me I CANNOT pay myself as an owner like a w-2 type of employee.=>As mentioned above. Unless your MMLLC files its return as a S ? or regular C corp, NO.



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