Paying in estimates via an S-Corp owners payroll

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#1
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I've had a couple coworkers tell me this method is possible (and done at their prior firms) but I'm not sure how it would work (especially with stringent payroll rules).

They would essentially pay in estimated taxes (that would normally be paid via vouchers) through the S-Corp owners payroll.

How would they go about doing this? I'm using Gusto currently and am not seeing the flexibility in the software that would allow for this.
 

#2
sjrcpa  
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Larger than normal withholding.
 

#3
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sjrcpa wrote:Larger than normal withholding.


Is W/H something you can adjust throughout the year or is that something you need to keep consistent?
 

#4
sjrcpa  
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It can be adjusted at any time.
 

#5
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Some payroll companies around here will allow you to just add $100k, $200k ,etc to withholding and pay it in via 941 deposits. They will not even require you to bonus out the funds. Most though now require a bonus so they have something to withhold the funds from.

You then treat the additional withholding as distributions
 

#6
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I wouldn't suggest this to a client unless they're very irresponsible or have proven they can't be bothered to make quarterly estimates. The time value of money works out in the client's favor if they just withhold the regular amount for their filing status and pay the difference as a quarterly estimate to get to safe harbor.
Last edited by ManVsTax on 27-Jun-2022 9:33am, edited 1 time in total.
 

#7
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BerkshireCPA wrote:Some payroll companies around here will allow you to just add $100k, $200k ,etc to withholding and pay it in via 941 deposits. They will not even require you to bonus out the funds. Most though now require a bonus so they have something to withhold the funds from.

You then treat the additional withholding as distributions


Do you think that would require a new W4 each time?

I wonder which firms out there would allow a good balance of doing most of this for me while also allowing that level of flexibility.
 

#8
sjrcpa  
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Technically it would require a new W-4. But a lot of small firms just allow an employee to change withholding by asking.
 

#9
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I've seen this before where the firm does a -0- net payroll where they pay in the taxes to meet the reasonable comp requirement and also pay in estimated taxes. I use ADP and they'll allow a 1 time override for withholdings, etc.
 

#10
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Two out of my four payroll clients do this and my largest client (which uses a payroll bureau) does it as well. Any firm I have worked for, on both sides of the Atlantic, has done the same upon request.

We have had this discussion before. Makbo argued strenuously against it.
 

#11
NYCCPA  
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Rather easy. Run one payroll a year to cover the individuals estimated taxes. Only really works for clients that can manage their funds accordingly enough to leave sufficient cash to run the year end payroll.
 

#12
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I do this all the time.

When a client comes in and we thought he was going to make 350k so we did 150k payroll... but he comes in for year end planning in November and he made 500k and has already distributed it... so my estimates were all wrong and the payroll is looking insufficient..

He owes another 50k in taxes and should also have a bigger payroll by 50k. Run one year end bonus and put it all in withholding after his ss and Medicare taxes.

Two birds, meet my one stone!
Know your worth, then add tax!
 

#13
jon  
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I had a client who changed to an S Corp - He would never draw the salary he could take thinking he did not touch until he had to. Always bonused out enough to cover taxes in the last month of the year.
 


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