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Video instructions and help with filling out and completing Are 8850 Form Compensation

Instructions and Help about Are 8850 Form Compensation

I operate an escort for my business. I just started it last year. Am I required to pay myself a salary? Now, that is an excellent question. Just a little bit of background for the rest of you guys out there: as you operate an escort, that is just a regular corporation that you have made an S selection. So, the corporation doesn't pay tax on its own. It is very common for small business owners who may be the only owner of the business to form an S corp because then they have what's called pass through taxation. This basically means that whatever is earned at the company passes through to the tax return of the individual, rather than having to pay corporate tax. It's a very good idea and it certainly makes it a little bit less complicated. The S corp still has to file its own tax return, a form 1120s, but there's a little bit of a difference on how that entity pays tax. Now, back to your specific question. You are required to pay yourself a reasonable salary. The reasonableness is always a good question because the IRS wants to leave it a little bit open for interpretation, but again, the key is reasonable. The first thing to keep in mind is that since last year was your first year of the business and I'm not sure exactly the detail of your question here, so I'll answer it both ways just in case. If the S corp is just getting up and going and you don't actually have any earnings, for example, maybe you just started the S corp in November and so you haven't even had time to cover your start-up expenses yet, if a corporation is not earning money, then certainly the IRS...