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When paying yourself or family members there are special rules,
exemptions and restrictions.
For example a sole-proprietorship, general partnership, limited
partnership, and most LLC's and LLP's may not pay "wages" to an owner
(to yourself). They may pay wages to your non-owner family
members with certain exemptions. S-Corps and C-Corps should pay
regular form W-2 wages to the owners (to yourself).
Remember that wages are "earned
income" and as such are subject to employment taxes, whereas trading
profits and the distributions of them to you as a "dividend" or
"withdrawal" are generally not subject to payroll taxes. So draw a
reasonable but not excessive salary (or other form of "earned
income") and do not subject more than is necessary to payroll
taxes. Use this earned income to your advantage: Medical/Health insurance, Retirement plan,
Social Security Benefits including Survivors Benefits, Disability and
Medicare & Medicaid as well as other "employee" benefits.
State withholding taxes, Unemployment Fund taxes, Disability Insurance
taxes, Workmans' Compensation and other fees and taxes are applicable
once you have employees and annual form W-2 is issued to them (which
can sometimes include yourself) These
fees and taxes are generally assessed based on where the employees'
services where performed (mandatory filing). Optionally,
withholding taxes can also be based on the employee's
home state of residency.
Withholding taxes are generally credited to the employee ratably over
the 12 months of the year, even if the withholding and remittance is
made at the end of the year. Therefore a trick to minimize
estimated income tax underpayment penalties, is to withhold excess
withholding taxes in lieu of making late quarterly estimated tax
payments.
Registration information:
For Internal Revenue Payroll Taxes their EFTPS on-line payment option
is available. Go to www.eftps.gov
and follow the prompts for enrollment. Or you may call 1-*00-TAX-FORM
and ask for a "New employer package."
California information
http://www.edd.ca.gov/taxrep/taxloc.htm or call 1-888-745-3886.
Use their
DE 1 form to register as an employer with the
state of California.
Connecticut - to register for EFT, employers must complete and
return
Form EFT-1, Authorization Agreement for Electronic Funds Transfer.
For New York State you may enroll at
www.tax.state.ny.us/prompt
or you may call 1-800-338-0254.
Colin M. Cody, CPA, CMA
TraderStatus.com LLC
6004 Main Street
Trumbull, Connecticut 06611-2400
(203) 268-7000
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