The little word that causes big panic? - DM Accounting Services

Today I?m going to talk about something NO ONE wants to discuss. It?s a word that strikes fear and panic into the heart of every businessperson. Just the mere thought of this ?A? word can bring tears to a grown man?s eyes.

Yes, we?re talking about an IRS Audits.

Do you know that the surest way to get audited if you own a business is to NOT pay yourself a salary? That?s right, the number one risk for S-corporations to get audited is to file your taxes without being compensated for your work.

The thing is that the IRS knows few people work for free, so it figures you?re getting paid one way or another and you need to be taxed on that income.

Not paying yourself a salary is a red flag because one major the agency makes money is by collecting payroll taxes. So if you don?t pay yourself, the IRS doesn?t get paid.

Bottom line, the penalty for failing to pay payroll taxes is 100% of the taxes owed, plus interest and penalties!

What if you?re a new business, or you?re losing money? Even so, you should still pay yourself. According to the IRS, your salary doesn?t have to be a lot, it just has to be ?reasonable?.

So what exactly does reasonable mean? Here are some guidelines.
Zero salary isn?t considered ?reasonable? so whatever you do, don?t pay yourself nothing.
Below minimum wage isn?t reasonable either.
Consider what you would accept for a similar position at another company. You wouldn?t accept an offer of $5,000 to be the CEO of a company, the IRS reasons, why should your company be any different?
One way to figure out a reasonable wage is to tally the number of hours you work for your business, your knowledge and skills, then base your salary on the amount of time you spend working.
By the way, not only must you pay yourself a salary, you must also have a record of your payments.

At DM Accounting we can help you pay yourself in a way that minimizes taxes and maximizes deductions. We can set up small weekly or monthly disbursements that won?t break the bank, plus we monitor at ALL times to ensure there?s enough cash flow to support your salary. If we need to skip a payment or two, that?s not a big deal.

So pay yourself a salary not only to avoid the payroll tax penalty and an audit, but also because you?re worth it!

Wishing you much success and $$$!!

Tags: accounting, bookkeeping, DM Accounting, miami accountant, miami bookkeeper, south florida professional bookkeeper

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