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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12044
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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After 20 years as a sole proprietor I converted my business

Customer Question

After 20 years as a sole proprietor I converted my business to a Sub S corporation last year. However I continued paying myself as I had done in the past without withholding taxes, instead paying estimated taxes on a quarterly basis. Time came to do the tax return, which my wife takes care of. Then came the check from the IRS and it was huge! Surprised, I began to investigate the return and found that no self-employment taxes had been paid. I have since learned that Sub S corporations don't do it that way. More fool me, but now I want to set things right. How do I proceed to pay those taxes, and what penalty (ies) should I expect to pay? (for calendar year 2014)
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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I can help here ... let me read your question

Expert:  Lane replied 1 year ago.

Ok, what's you'll need to do is amend your 1120-S (and the resulting 1040) for 2014.

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the fica (1/2 of SS * Medicare- employee side) should have been withheld and paid-in by the s-Corp from your salary, and then the S-Corp itself pays-in the employer half.

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So you'll re-do the 1120-S with those changes, give yourself a W-2 showing the SS&Medicare withheld from the salary portion of your income (no SS & Medicare on the K-1 profits over and above salary) then redo the 1040 with those changes reflected.

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That will then allow you to ise the 1040X (amended personal return) and the amended 1120-S and send in (together as one package)

Expert:  Lane replied 1 year ago.

And once you know the numbers you can go here to pay in what needs to be paid in to reconcile: https://www.irs.gov/Payments

Expert:  Lane replied 1 year ago.

Please let me know what questions you have from here.

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Lane

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Expert:  Lane replied 1 year ago.

LHi,

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I'm just checking back in to see if my answer helped.

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If so, I'd appreciate a positive rating, using the stars on your screen. (That's the only way I'm credited for my time and expertise)

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But if you need more on this ... Let me know

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Thank you,

Lane

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