I own an S-Corp and do consulting services through my S-Corp. I am the only person doing any work. Also, I find employment taxes to be a pain in the butt, calculating income and self-employment taxes, making sure I send the payments in on time, yada yada. Would it be ok to just consider myself an independent contractor for my company and 1099 myself at the end of the year? That way the IRS still gets their Social Security tax right, I just don't have to waste time with all the hassles of having an employee... So what I'm saying is, would this raise any red flags, and if I were audited would this be an ok thing that wouldn't get me in trouble?
2006-11-10 13:35:03 · 3 answers · asked by Vesuvius 3 in Business & Finance ➔ Taxes ➔ United States
I'm not fully sure, but offhand I think the answer here is not a good idea.
The IRS looks at the line for officer's compensation in comparison to the rest of the return looking for someone trying to take all their compensation out via dividends.
Although this isn't your case, I think it would be hard to argue that you are an independent contractor because of your relationship with the company. Generally, this is a hot button issue with the IRS as many 'think' they can fit into the independent contractor because the definition is really vague.
In any case, I'd consult your tax advisor for a look during your tax planning.
2006-11-11 01:53:04 · answer #1 · answered by Molly 6 · 0⤊ 1⤋
The bottom line is that you cannot avoid SS contributions. they will be the same, whether they are paid by the S-Corp or yourself personally. You will have to make quarterly tax payments in either case, so the only work you are saving is the quarterly returns. Payroll for one person is a couple of minutes per paycheck.
Most returns can be filed online. Here in NC, they even pre-fill your SUTA return.
You can certainly do as you propose (as long as what goes on the 1099 is what would otherwise have gone on W-2 and as long as it is reasonable compensation). I just question your motivation for doing so. Take a look at online filing at the link below. Otherwise, ask your accountant what services he offers. You may be pleasantly surprised.
By the way, I have no idea who gave Steven F a thumbs down. He is correct.
2006-11-11 02:12:31 · answer #2 · answered by skip 6 · 1⤊ 1⤋
If you are an independent contractor, you have to file self-employment taxes on you personal return. Earnings of an S-Corp are taxed on you personal tax return. It seems to me you would not save yourself any paperwork. If you can't do the record keeping yourself, hire an accountant.
BTW, I have no idea if you are allowed to hire yourself as an independent contractor.
2006-11-10 13:43:00 · answer #3 · answered by STEVEN F 7 · 1⤊ 1⤋