This document explains why an S-Corp needs to setup payroll (even if you are the owner and have no other employees) and walks you through how to ensure you've satisfied your payroll requirements if you are an S-Corp.
Why do I need to set up payroll?
As an S-Corp, while you are still the owner, you are first and foremost an employee of the business and are required to set yourself up on payroll to pay yourself a reasonable salary.
How can I ensure that I comply with all the necessary requirements?
Please review our Payroll Audit Checklist for steps you’ll need to take to ensure you are compliant with federal and state requirements. By following these steps and providing the necessary information, you can ensure compliance with all required payroll regulations.
Here are the key compliance requirements:
- Run payroll within the calendar year
- Set a reasonable salary
- Provide health insurance
- Pay payroll taxes (both federal and state)
- Specify the amount of federal payroll taxes
- Specify the amount of state payroll taxes
- Complete state registration
- If applicable, provide a list of the states where registration has been completed
By following these steps and providing the necessary information, you can ensure compliance with all required payroll regulations.
We've created a series of articles to help you with these requirements as well as other best practices:
- Payroll Setup: Creating an Accountable Plan
- Payroll Setup: Adding health insurance to your wages
- Payroll Setup: Completing your W-4
- Payroll Setup: State Registration
What are the implications if I haven't run payroll?
If you realize you haven't run payroll before the end of the calendar year and are obligated to do so, there may still be enough time to run payroll. Between the time you elected your S-Corp status and now, it is possible you may receive notices about missing wage reports. In that case, it would simply mean working with the state revenue service and the IRS to submit $0 fillings since payroll was not run for those periods.
Going forward, it’s important to ensure payroll is set up and you are running it so that the payroll provider can prepare and submit this filings on your behalf. It is important to take immediate action to prevent any fines, penalties, and interest charges from the IRS when you file your annual tax return.
How do I set up payroll if I haven’t already?
If you haven’t set up payroll for your therapy practice, click here to access Heard Payroll. Feel free to refer to this article for more information on how to set up Payroll for your Therapy Practice.
What if I already do have payroll set up?
Your next steps for ensuring compliance depend on what service you use for payroll.
I use Gusto or Heard Payroll
Great! In order to ensure compliance and help manage any potential risks, we need visibility by having you add our team as an admin on your Gusto account. By doing so, we'll be able to review your Payroll account to ensure that any high risk issues are identified before the end of year to avoid potential payroll notices that could result by not resolving them sooner. After reviewing your account, we'll reach out to you to confirm next steps and how to resolve any issues accordingly.
If you have not done so already, here are instructions to get you started on changing administrator permissions so the Heard team will be FULL Admin on your Gusto account: Manage administrator permissions.
Once you're in Gusto editing our access, here's the information you'll need to submit:
- First Name: Heard
- Last Name: Payroll
- Email: email@example.com
I use an external payroll provider (not Gusto or Heard Payroll)
The Heard payroll team is proficient in using Gusto, but they may not have experience with other payroll platforms. Unfortunately, we are unable to be added as an admin/accountant to your payroll processor and provide the same level of support that we do with Gusto. Therefore, you would need to rely on the support of your payroll processor to ensure compliance.
If you are taxed as an S Corp, our payroll and accounting team can assist you in calculating your reasonable salary and provide ongoing analysis. However, please be aware that our team will be unable to provide additional payroll support unless you switch to Heard's payroll solution. It is important to note that you will be responsible for running your payroll each period for security reasons. Many customers opt for setting up auto-pay, which requires no action every pay period. However, it is recommended to verify with your payroll provider as each software operates differently.
One of the major advantages of using Heard Payroll is the ability to manage all your bookkeeping, accounting, taxes, and payroll within a single login! Our payroll team will offer hands-on support throughout the year and will be available to answer any questions you may have regarding payroll.
How can I ensure Heard has all the documents needed for tax season?
Please take a moment to ensure that the following compliance documents are uploaded to your Heard account. If you have not already done so, please upload these documents as soon as possible.
- CP261 Notice: S Corporation approval letter from the IRS
- Form 2553: S Corporation election
- CP575: EIN letter from the IRS
If you are unable to find any of the necessary documents, feel free to reach out to the IRS at 1-800-829-4933. When contacting them, please ensure that you have your Employer Identification Number (EIN) handy. You can expect to receive these documents by mail within a specific timeframe after making your request.