As the year concludes, it’s essential to address a critical compliance requirement for your S-Corporation: establishing and processing officer payroll by December 31, 2024. This step is vital to adhere to IRS regulations and mitigate potential risks.

Why Officer Payroll is Necessary

The IRS requires that S-Corporation officers who perform substantial services receive reasonable compensation through payroll, subject to payroll taxes such as Social Security and Medicare.

Risks of Non-Compliance

Neglecting to process officer payroll can lead to:

1. IRS Audits and Penalties: The IRS may reclassify distributions as wages, resulting in back taxes, penalties, and interest.
2. Loss of Tax Deductions: Misclassified distributions may not qualify for tax deductions, increasing your tax liability.
3. Increased Payroll Tax Liability: Non-compliance can accrue significant payroll taxes and penalties for late payments.
4. Heightened Scrutiny: Failure to comply may attract closer examination in future tax filings.

Recommended Solution: Paychex Payroll Services

To ensure compliance and streamline payroll processing, we recommend partnering with Paychex, a reputable provider specializing in S-Corporation payroll services. Paychex offers:

• Tailored Payroll Solutions: Customized services to meet the unique needs of S-Corp officers, including “Officer Only Payroll” options.
• Comprehensive Tax Management: Automatic calculation, payment, and filing of federal, state, and local payroll taxes, ensuring timely compliance.
• User-Friendly Platform: Access payroll information and manage processes through a secure online portal, enhancing efficiency.

Next Steps

1. Determine Reasonable Compensation: Assess a fair market salary for the services you provide, considering industry standards and your role.
2. Engage Paychex Services: Contact Paychex to set up your officer payroll, ensuring all processes are in place before year-end.
3. Consult with Us: For assistance in determining compensation or navigating payroll setup, please reach out promptly.

Our team is here to support you in meeting these requirements and safeguarding your S-Corporation from potential risks. Contact us or schedule a meeting at your earliest convenience.

Let’s ensure compliance and position your business for success in the coming year!