Have a Tax Question? Ask a Tax Expert
Hi and welcome to our site!Your assumption is correct. The C-corporation is a separate entity - and when the C-corporation pays someone for services - there will be appropriate paperwork and reporting.If your partner and you personally work as employees of the C-corporation - each of you will be paid wages. Form W9 is not required - but you may prepare this form and keep it for each employee. However - that is not required.When is required - when C-corporation pays wages to yourself or to other employees - such wages are subject of employment tax - and in January - the C-corporation will issue W2 form to each employee - which each employee will use to prepare his/her individual tax return.
On the corporate tax return -wages paid to employees will be deductible expenses - thus will reduce net taxable income of the C-corporation.
Ok, so from a financially strategic approach would you recommend that my broker agreements with the lender go straight to the Coroporation and I then pay my partners and myself, then when I bring in independent contractors, I have them to fill out a w-9? However......for an example,,,,,,the lender would pay me $200....I pay the contractor 100 or half....the contractor would then be responsible for the taxes?....If so, how do I claim this payment on the corporate taxes?
By signing form W9 - the person certifies his/her tax identification (social security number or tax ID) and that he/she is not subject of backup withholding. So - that is a good practice to need a signed W9 form for each employee and each independent contractor to whom your C-corporation makes payments. That is a standard way to obtain tax information of payees. However if your C-corporation have all information needed to report such payments W9 forms are not required.
So, for my partner she would just fill out a W2 both State and Fed, I would calculated the estimated tax withholding and then write a payroll check? then the Independent contractor would do w-9 and would be responsible for reporting as I would report payments to the IRS on that independent contractor?
Again - as long as you have all information required for reporting - such as the name, address, tax ID - the form W9 is not required.If your C-corporation pays to the contractor - not an employee - that compensation might need to be reported if the compensation for services will be more than $600 per year - such compensation must be reported to that independent contractor and to the IRS on form 1099misc - http://www.irs.gov/pub/irs-pdf/f1099msc.pdf
You need to be clear that a worker is independent contractor and NOT an employee. That is because there are different reporting and withholding requirements for employees.
Ok, so when I hire someone as an employee , would they fill out the state and fed w2?
Let's be clear - not you - but your C-corporation which is a separate entity - hires either an employee or an independent contractor.In case of an employee - the corporation pays wages - which are reported on W2 form. There is only ONE W2 which is used to federal and state reporting.In case of an independent contractor - the corporation pays compensation - which is reported on form 1099MISC (if compensation is above $600).The recipient will file his/her tax return - and will report all types of income regardless if such income is reported to the IRS or not.
Thank, You very much......got it