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M
mzenah
October 9, 2018

Payroll Tax applied on foreign C corporate owner

  • October 9, 2018
  • 3 replies
  • 0 views

I'm Canadian C Corporate owner , if i want to pay payroll for myself do i need to withhold tax & file periodic payroll tax form?i live & work from Canada

 

    3 replies

    EmilyCowan
    EmilyCowan
    October 10, 2018

    Hey @mzenah - welcome to QB Community. Would love to hear more about your business. You live and work in Canada but your C Corp is located in the U.S.?

    M
    mzenahAuthor
    October 11, 2018

    Hi Emily, 

    Yes that's right , i live & work in Canada & own drop-shipping C corporate in Florida USA 

    hope you can help me with issue 

     

    Maha

      EmilyCowan
      EmilyCowan
      October 11, 2018

      Got it - thanks for clarifying! For some basic information on paying yourself from your C Corp, check out this article from the U.S. Internal Revenue Service. I also like this article for considering whether to pay yourself a salary or take an owner's draw.

       

      @Peter_G_Stone, @Rustler, @lynda11_2, any thoughts on Maha's situation?

        Peter_G_Stone
        Peter_G_Stone
        October 11, 2018

        @mzenah, as a corporate officer, you are obligated to pay yourself a salary. This is not optional under US federal tax law. Although you live in Canada, the business is based in FL and this is where payroll taxes will be paid. I understand FL has no income tax, so most likely you will have no payroll tax other than SUTA for the state. However, I am unfamiliar with FL tax law, and I suggest you consult a knowledgeable FL CPA, EA, or other tax/accounting professional. 

        Normally, on the federal side, you have 15.3% total FICA withholdings that will need to be paid. The company pays half for you, and is half deducted from your gross pay. There is also FIT that will vary depending on your gross salary amount. This amount must be paid with your other employees (if any) withholdings with the company's 941 payroll taxes. Frequency of payments (bi-weekly, monthly, yearly) depend on different factors.

        Seeing as how you live and work in Canada, I'm sure there are more  complexities for you personally with the salary (i.e currency exchange). I advise you to consult a professional with multi-national business experience. Thanks, hope that helped some.

          Rustler
          Rustler
          October 12, 2018
          @Peter_G_Stone wrote:

          @mzenah, as a corporate officer, you are obligated to pay yourself a salary. This is not optional under US federal tax law. 

           

          I read this differently, I do not see a definite requirement for an officer who does not work in that location.

          https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-and-corporate-officers

           

          The definition of employee for FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act) and federal income tax withholding under the Internal Revenue Code include corporate officers. When corporate officers perform a service for the corporation and receive or are entitled to payments, those payments are considered wages.

           

          If an officer does not perform any services or only performs minor services and is not entitled to compensation, the officer would not be considered an employee.

            Peter_G_Stone
            Peter_G_Stone
            October 12, 2018

            @Rustler, good points, but whether @mzenah is working at the location is not the main issue. The services provided are. I based my answer off the assumption that there are significant services provided from the OP. Perhaps there are not. Maha, should see a professional where these topics can be discussed in depth. 

              J
              jemyjanie
              November 20, 2023

              When a foreign owner holds shares in a U.S. C-Corporation, payroll taxes typically don't directly apply to the foreign owner unless they are actively working for the corporation within the United States.

              However, if the foreign owner is employed by the C Corporation  and performs services within the U.S., they might be subject to U.S. payroll taxes such as Social Security, Medicare, and federal income tax withholding on their compensation, similar to any other employee.

              Foreign owners who are not actively engaged in providing services within the United States might not be subject to U.S. payroll taxes, but they might have other tax obligations related to their ownership interest or income generated from the C-Corporation. Taxation for foreign owners of U.S. entities can be complex and may vary based on treaties, local laws, and individual circumstances. Seeking advice from a tax professional or international tax expert is highly recommended to ensure compliance with relevant tax laws and regulations.

               
               
               
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