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D
DRAutoRepair
February 1, 2024
Question

How do I pay a business owner in payroll

  • February 1, 2024
  • 1 reply
  • 0 views

The issue I am having is I have a salary amount determined and the business owner set up as an employee. I programed in the salary, it is taxed at the employee rate, and then again from the employer. For example a $2300 salary ends up costing $2450 to the company. How do I pay the employee who is the employer and just get taxed the state rate of 22% fed, 4.25% state, and 15.3% med/SSI out of the salary without costing the business additional taxes? I also cannot find where to set up distributions. Will I need to pay the salary and then set up a vendor account for distributions? In doing this the distributions are not taxed so I will have to write a check to the feds quarterly. We set up QuickBooks so that I would not have to send checks to pay taxes and it would be automatic through the program. I’m not understanding why I’m paying $125/month if the program is not set up to correctly account for an owner/employee taxes. 

1 reply

A
Archie_B
February 2, 2024

Hello there, DRAutoRepair.

 

Allow me to share and clarify some information about setting up a business owner as an employee in QuickBooks Online Payroll.

 

If the business owner is set up as an employee in QuickBooks Payroll, you can follow the regular payroll process to pay them a salary. This includes setting up their salary, deductions, and tax withholdings. Taxes such as federal and state are calculated automatically in the system based on the employee's salary.

 

Also, employer taxes are specific tax obligations that an employer must comply with. These taxes include Social Security and Medicare taxes, which total 15.3%.  However, these taxes are calculated separately from the employee's tax withholdings and are not deducted from their pay. This means that the system automatically calculates the appropriate amounts for both the company/employer's contribution and the employee's deduction.

 

Additionally, distributions to the business owner are typically not subject to payroll taxes since they are not considered wages. However, distributions may be subject to income tax. It's important to consult with a tax professional to determine the tax implications of distributions for your specific situation.

 

For more details about adding an employee and how to get started with payroll, you can check the following articles below:

 

 

Let me know if you still have other payroll-related concerns or follow-up questions. I'll be here to assist. Keep safe!

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