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Geo2199
April 29, 2021
Question

How do you pay yourself a salary and distributions as a llc taxed as an s corp business owner through Intuit payroll?

  • April 29, 2021
  • 3 replies
  • 0 views

Good afternoon. I just spoke with payroll customer support and they showed me how to set up payroll for my company as the owner. I previously had it set up to pay a total of $8,668 per month broken down every two weeks which would be $4,334 per check via direct deposit. After speaking with a CPA he advised me that I qualify to pay myself a 1:1 ratio of salary and distributions to help lower my personal tax burden since I operate an LLC that has elected to pay taxes as an S Corp. My question is I set the payroll up to pay myself $2,167.00 every two weeks but I didn't find a tab for distributions to pay myself the other $4,000 per month based on performance via direct deposit.

 

My question is do I just elect to pay it as a bonus through payroll, tip, or as a commission?

 

If I select one of those tabs for payment will it still be taxed at the same tax rate of a salary basically defeating the purpose of setting up the distribution?

 

Or should I just elect to pay the $4,000 in a check once a month? Can payroll still keep track of this for tax purposes? 

 

 

3 replies

R
ReymondO
April 30, 2021

Good day, @Geo2199.

 

Thanks for reaching out in the QuickBooks Community. 

 

With regards to paying yourself in QuickBooks, I'd recommend reaching to an accountant. Both commissions and bonuses checks are taxed differently than a simple salary. They are taxed in w 2s and 1099s tax forms as supplemental wages and the amount withheld is not the same

 

If you create a regular check to pay yourself, this won't be taxable since it's not a payroll transaction.

 

Aside from paying yourself by taking a salary, you can also compensate yourself with an owner’s draw. To understand their differences, you can check out this article: Owner’s draw or salary: How to pay yourself.

 

The Community always has your back, so please let me know if you have any other questions. I'll be more than happy to help. Keep safe. 

G
Geo2199Author
April 30, 2021

Thank you for your reply and information. My question is how do I get quickbooks payroll to deposit a once a month distribution direct deposit into my account as well as my regular every two week salary? A check on the second and last Friday of every month for my regular salary and a single distribution check at the end of the month. I didn't want to process it as a bonus or commission payment due to more taxes having to be paid versus it being classified as a distribution payment.

    Rubielyn_J
    Rubielyn_J
    April 30, 2021

    I appreciate your time getting back in here, @Geo2199.

     

    We can set up a direct deposit. Then, create a separate pay schedule for monthly and weekly salaries. 

     

    With payroll, you can set up a direct deposit and pay your employees with electronic deposits directly into their bank accounts or pay cards . 

     

    To start, set up your company payroll for direct deposit. Then, get a direct deposit authorization form. 

     

    1. Select the Taxes menu and choose Payroll Tax.
    2. Click Employee Setup.
    3. When you reach Authorization for Direct Deposit, choose Bank Verification.
    4. Click View and print.

     

    After you complete this setup, the next paycheck you create for yourself will be a direct deposit. You can check this article for more details: Set up your company payroll for direct deposit.

     

    Then set up and manage your pay schedules in QuickBooks. 

     

    Feel free to go back to this thread if you have other payroll concerns. I'll be around to help. Have a nice day.

    S
    switching from desktop to onli
    August 7, 2021

    I have the same question and it doesn't look like either of the previous "answers" answered your question at all!  Did you ever figure it out???

      BettyJaneB
      BettyJaneB
      August 7, 2021

      Thanks for joining us here in the Community, @switching from desktop to onli.

       

      I have some insights to share about processing your payroll in QuickBooks Online.

       

      As mentioned by my peer above, you can set up a direct deposit for your payroll. This way, you can create a separate paychecks for your salaries. To guide you in setting up the direct deposit, please follow the steps presented above.

       

      Once done, you can now start creating paychecks for your salaries. You can check out this link attached to guide you with the set up and the process: Create paychecks in QuickBooks Online.

       

      In terms of how to handle your taxes, I'd still recommend reaching out to your accountant. They'll be able to give you the best course of action for your business.

       

      You may also seek help from our accountants through this site: Find an accountant or bookkeeper who loves your business as much as you do.

       

      Lastly, I'm adding here an article about the tax calculation in QuickBooks Online for your reference: How to calculate payroll taxes: Tips for small business owners.

       

      I'll be right here to help if you need anything else concerning payroll. Just leave a reply below. Keep safe!

      S
      Seanpallen
      March 6, 2022

      So quickbooks does not have an option to pay yourself for "Distributions" for an S-Corp and take the correct tax out...Is that correct?

        P
        penrodcpa
        January 23, 2024

        2+ years later and QBO still cannot do this.  Here's my workaround -

        Create a Reimbursement type under Additional pay types.  Name it "Owner Draws".  This will correctly add the draw to the paycheck without taxing it.

        This will create an expense account Reimbursements:Owner Draws. If the amount is the same every paycheck, create a recurring journal entry to debit the equity account and credit the expense account to happen every payroll.  If the amount is different, you will need to manually enter the journal entry every payroll.  That will move the draw amount to the correct equity account.

        This is not the best way to handle it, but it does give the S-Corp owner a way to have their draws direct deposited instead of having to do a separate check/transfer.

        Maybe one day Intuit will use some of that money we're paying them to make this work the right way.

          P
          pnunez
          February 6, 2024

          penrodcpa

           

          This is the method I use as well, with some minor tweaks. I find it more convenient than creating a Vendor and using the Quickbooks Bill Pay method. The owner draws/distributions just go out with paychecks through payroll.

           

          I create the reimbursement type as you do, but I then go to Payroll Settings -> Accounting -> Wage Expenses and change the category for this reimbursement to a liability account (which I name "Owner Draw/Distribution Advance") instead of an expense account. This way, owner draws/distributions don't go to the P&L report. Ideally, you would categorize it directly to an equity account where it belongs, but it will not let you choose equity accounts. So, at the end of the year, you can move the full amount in the liability account to the correct equity account of "Owner/Shareholder Draw/Distributions".

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