Monthly vs Quarterly Payroll for S Corps | IRS Rules Explained
Monthly vs quarterly payroll is not a preference question. It’s a compliance decision that affects cash flow, penalties, and audit risk.
Running payroll once a year to save on paperwork, paying yourself randomly when cash feels tight, or not realizing you’re quietly waving a red flag at the IRS. These are mistakes that cost business owners thousands in penalties and sleepless nights.
The consequence? Cash flow disasters, IRS scrutiny, and payroll tax bills you weren’t prepared for. But here’s the good news: getting your S Corp payroll timing right isn’t complicated once you understand the rules.
In this guide, we’re breaking down monthly, quarterly, and annual payroll; what actually works, what can get you in trouble, and how to structure your salary the right way. By the end, you’ll know exactly which payroll schedule protects you best while keeping you compliant with IRS requirements.
Why Payroll Timing Matters for S Corp Owners
Here’s what most business owners don’t realize: S Corp payroll timing isn’t about convenience. It’s about protection and compliance.
As an S Corp owner, you’re walking a tightrope. Pay yourself too little in W-2 wages, and the IRS may challenge your reasonable compensation. Pay yourself inconsistently or at odd intervals, and you risk triggering red flags that invite audits.
The timing of your payroll affects:
- Cash flow predictability – Knowing when payroll taxes hit your account prevents surprise shortfalls
- Compliance with federal and state filing requirements – Some schedules require zero returns even when you don’t run payroll
- Your ability to avoid costly payroll tax penalties – Late or missed filings add up fast
Think of payroll timing as your financial safety net. Get it right, and you sleep well at night. Get it wrong, and you’re scrambling to catch up on tax bills you forgot about.
What the IRS Requires for S Corp Payroll
Let’s get crystal clear on the baseline requirement: if you’re organized as an S corporation, the IRS requires you to take a reasonable salary.
This isn’t optional. The IRS requires S Corp owners who actively work in their business to pay themselves a reasonable salary through formal payroll.
That means:
- You are an actual employee of your business
- You must file payroll tax forms with federal and state agencies
- You must pay payroll taxes (Social Security, Medicare, federal and state withholding) on a regular basis
This is fundamentally different from how sole proprietors and partnerships operate. Before you became an S Corp, you could take owner draws whenever you needed money. Now, you still take distributions, but you’re required to run formal W-2 payroll first.
The IRS doesn’t dictate how often you run payroll, but they do expect it to happen on a regular, consistent basis. That’s where the monthly versus quarterly decision comes in.
Monthly Payroll Explained
Monthly payroll is exactly what it sounds like: you take your reasonable salary and spread it evenly over 12 months.
For example, if your reasonable salary is $80,000 annually, you’d pay yourself approximately $6,667 per month ($80,000 ÷ 12). If you run payroll twice a month or every other week for other employees, you simply include yourself in those regular pay runs.
Why monthly payroll works:
- Regular cadence – You establish a rhythm. Payroll runs automatically, taxes get filed, and you don’t have to remember special deadlines.
- No surprise tax bills – Payroll taxes come out incrementally throughout the year, so you’re never hit with a massive payment you weren’t expecting.
- Clean compliance – Filing happens on schedule, reducing the risk of missed deadlines or forgotten zero returns.
- Easy to manage – If you’re already running payroll for other employees, adding yourself to the same schedule is seamless.
This is the method I recommend for most S Corp owners, especially those who are new to running payroll or who want maximum predictability in their cash flow.
Quarterly True-Up Payroll Explained
Quarterly payroll (often called a “true-up” method) means you take owner draws throughout the quarter, then convert a portion of those draws to W-2 wages at the end of each quarter.
Here’s how it works in practice:
Let’s say you take draws of $15,000 per month, totaling $45,000 for the quarter. If your annual reasonable salary is $80,000, that equals $20,000 per quarter. At the end of the quarter, you “true up” by moving $20,000 of those draws into W-2 wages, file the payroll tax forms, and pay the associated taxes.
The remaining $25,000 stays classified as distributions.
Why some owners prefer quarterly payroll:
- Flexibility – You take money from the business as needed without being locked into a fixed payroll schedule.
- Simplicity for solo owners – If you don’t have other employees, you only deal with payroll paperwork four times a year instead of twelve.
- Less administrative overhead – Fewer payroll runs mean less time spent on processing.
This method can work well for experienced business owners who are diligent about setting aside cash for taxes and who stay on top of filing requirements.
The Risks of Quarterly Payroll
While quarterly payroll offers flexibility, it comes with significant risks that catch many business owners off guard.
- Cash Flow Surprises
The biggest danger is the sudden tax bill at the end of each quarter. When you true up $20,000 in wages, you don’t get a “take-home” payment—you’ve already taken that money as draws. But you still owe payroll taxes on it, and those taxes must be paid on strict deadlines.
I’ve seen countless business owners reach the end of a quarter and say, “I don’t have the cash to pay these taxes.” Why? Because they spent it. With monthly payroll, those taxes come out incrementally, so the hit never feels as painful.
- Not Technically Correct
Technically, you should pay yourself in the period when you earn the wages. If you work in January, you should receive W-2 wages in January—not wait until March to true everything up.
While the quarterly true-up method has been used for years and isn’t uncommon, it’s not the IRS’s preferred approach. In an audit, this could draw scrutiny.
- Zero Return Filing Requirements
If your state or federal tax authority requires monthly payroll tax filings, you must file a return every month—even if you didn’t run payroll that month.
For example, if you only run payroll in March, June, September, and December, you’d still need to file zero returns for January, February, April, May, and so on. Miss those zero returns, and you face penalties.
This catches many business owners by surprise and adds administrative burden they didn’t anticipate.
Catch-Ups, Slowdowns, and Bonus Payroll
No matter which payroll schedule you choose, you’ll likely need to adjust throughout the year. Business income fluctuates. You might work more or less than expected. That’s where catch-ups and slowdowns come in.
When You’ve Paid Too Much
Let’s say it’s October, and you realize your reasonable salary is lower than planned—maybe you haven’t worked as much, or revenue is down. You can skip a few payroll runs in November and December to avoid overpaying yourself.
When You’ve Paid Too Little
On the flip side, maybe you had a great year and worked more than expected. Your reasonable salary should be higher. In that case, run a bonus payroll at year-end. You can convert some of your earlier distributions into wages by running a true-up payroll in December.
The Year-End Review Process
Here’s what I recommend: At the beginning of the year, estimate your reasonable salary. Let’s say it’s $80,000. Plan to run $6,667 per month or $20,000 per quarter.
Then, in October or November, revisit that number. Ask yourself:
Is $80,000 still appropriate, or should it be lower?
Did I work more than expected—should it be closer to $100,000?
Based on that review, adjust your final payroll runs for the year. This ensures you hit the right reasonable salary target without overpaying or underpaying.
Self-Employed Health Insurance and HSA Payroll Adjustments
Here’s a critical piece that many S Corp owners miss: self-employed health insurance premiums and HSA contributions affect your payroll strategy.
If you pay for health insurance or contribute to an HSA, you should run those payments through your business. Then—and this is the key part—you add them to your W-2 wages at year-end.
How It Works
Let’s say your reasonable salary is $80,000, and you have $20,000 in health insurance premiums and HSA contributions for the year.
You only run a cash payroll of $60,000 throughout the year. Then, at year-end, you make a W-2 adjustment to add the $20,000 in health insurance and HSA contributions. This brings your total Box 1 wages to $80,000.
The Benefit
That $20,000 is not subject to FICA taxes (Social Security and Medicare). You get the full tax deduction, it counts toward your reasonable salary, but you don’t pay self-employment taxes on it.
This is a huge advantage for S Corp owners—but only if you do it correctly. If you don’t run health insurance and HSA contributions through the business and add them to your W-2, you lose this deduction.
Work with your payroll provider to make this adjustment at year-end. It’s a simple process that can save you thousands in taxes.
The Best Payroll Schedule for Most S Corp Owners
After walking through all the options, here’s my recommendation for most S Corp owners: run monthly payroll or match the schedule of your other employees.
Why Monthly is Safest
Monthly payroll protects you from cash flow disasters. You’re not hit with surprise tax bills at the end of each quarter. Taxes come out incrementally, which keeps your cash flow predictable.
You also stay fully compliant. Filings happen automatically, you don’t have to worry about zero returns, and you’re less likely to trigger IRS red flags.
When Quarterly Might Work
If you’re an experienced business owner with strong cash flow discipline, quarterly payroll can work. You need to be diligent about:
Setting aside cash for payroll taxes every quarter
Filing zero returns when required
Tracking deadlines carefully
But even for experienced owners, I’ve seen quarterly payroll lead to problems. Cash gets tied up in other areas, tax deadlines sneak up, and suddenly you’re scrambling.
Never Go Annual
One more thing: never run payroll just once a year. This is a massive red flag for the IRS. Payroll should happen on a regular basis throughout the year. Annual payroll is not compliant and will invite scrutiny.
Use Payroll Software
No matter which schedule you choose, use payroll software. Even if you’re the only employee, software like Gusto handles filings, tax payments, and deadlines automatically. It’s inexpensive and saves you from costly mistakes.
Final Thoughts: Payroll Timing is About Protection
S Corp payroll timing isn’t about convenience—it’s about protection and compliance. Monthly payroll isn’t just safer; it’s smarter.
It protects your cash flow, keeps you compliant with IRS requirements, and eliminates the stress of surprise tax bills. While quarterly payroll can work for experienced owners, the risks often outweigh the benefits.
Here’s your action plan:
Determine your reasonable salary at the beginning of the year
Set up monthly payroll or match your existing employee schedule
Review your payroll in October/November and adjust with catch-ups or slowdowns as needed
Don’t forget to run health insurance and HSA contributions through your business for year-end W-2 adjustments
Use reliable payroll software to automate filings and tax payments
Get this right, and you’ll sleep well at night knowing your payroll is handled properly. Get it wrong, and you’re inviting cash flow disasters and IRS headaches.
If you want help from tax professionals who specialize in S Corp strategies like this, visit Tax Elm for a free discovery call. We help business owners legally lower their tax bill every single day.
FAQ: About S Corp Payroll Timing
Can an S Corp owner run payroll once a year?
No. Running payroll only once per year is a major IRS red flag. S Corp owners are expected to take W-2 wages on a regular, consistent basis throughout the year. Annual payroll does not reflect when work is performed and can trigger IRS scrutiny, penalties, and reclassification of distributions as wages.
Is quarterly payroll allowed for S Corp owners?
Quarterly payroll is not prohibited, but it carries higher risk. While some experienced owners use a quarterly true-up method, it requires strict cash discipline, timely tax payments, and filing zero payroll returns when required. Many business owners get into trouble with surprise tax bills and missed filings when using this approach.
What is the safest payroll schedule for S Corp owners?
For most S Corp owners, monthly payroll is the safest option. It keeps payroll taxes predictable, reduces compliance risk, and prevents large, unexpected tax payments. Monthly payroll also aligns best with IRS expectations for regular compensation.
Do S Corp owners still take distributions if they run payroll?
Yes. S Corp owners take both W-2 payroll and distributions. Payroll covers reasonable compensation for services performed, while distributions allow owners to take additional profits without paying self-employment taxes, as long as reasonable salary requirements are met.
Do I need to file payroll tax returns even if I don’t run payroll that month?
In many states and at the federal level, yes. If you are required to file monthly payroll tax returns, you must submit a zero return for months when no payroll is run. Missing these filings can result in penalties and IRS notices.
How do health insurance and HSA contributions affect S Corp payroll?
Self-employed health insurance premiums and HSA contributions must be added to an S Corp owner’s W-2 wages in Box 1. These amounts increase reasonable salary but are not subject to Social Sec
Transcript
Introduction: Common Payroll Mistakes
Most business owners don’t mess up payroll because they’re careless. They mess it up because nobody ever explained the rules clearly to them. I see it all the time. Owners paying themselves once a year to save taxes or running payroll randomly when cash feels tight or not realizing that they’re quietly waving a red flag.
At the IRS today, we’re breaking down monthly versus quarterly versus annual payroll. What actually works, what can get you in trouble and how to structure your salary the right way, especially if you are an S-Corp owner, trying to legally. Lower your tax bill.
Understanding Reasonable Salary for S-Corp Owners
so let’s start into some background concept of this now.
First off, if you’re organized as an S corporation, you need to take a reasonable salary.
As an S Corp owner, you are required to take a [00:01:00] reasonable W2 payroll salary for yourself as the owner. So that’s the first step we need to determine what is that reasonable salary. And we have podcast episodes, we have YouTube videos.
There’s chapter in my book that talks about how to determine that reasonable salary. But that’s the first step. Today we’re gonna be talking about and saying, okay, we know what that reasonable salary is, but now how do we actually run the payroll? How often do we gotta do it? How does that work?
And this can be so confusing to business owners, especially new S-corp owners, because they’re used to just taking money outta their business as they need it. They’re used to just taking owner draws like, oh, I need to go buy something personally. Take some money outta the business, or take some money out here and owner draw here.
And that works. Until you become an S-Corp owner, now you’re required to take an actual payroll W2 salary that’s required. Now you’re still gonna have owner draws or, or distributions, but you’re required to take W2 payroll as well. And so this can oftentimes be confusing and, and as people just getting an S-Corp say, this is a lot of work, I don’t know what to do.
And so that’s what we’re looking to solve today.
The Importance of W2 Payroll
Now to understand what is [00:02:00] W2 payroll? Even mean, it means that you are an actual employee of your business. You need to file payroll tax forms. That’s what the federal and the state you need to pay, payroll taxes on a regular basis as required by the federal and the state agency.
So that’s what payroll is. It is just taking a regular salary just as if you were working for somebody else, but you’re working for your own company in that W2 payroll. That W2 salary involves filing payroll tax forms, paying regular payroll taxes on a regular basis.
Using Payroll Software
Now, I highly recommend using a software to help with this payroll piece because so many people get caught into issues.
They get caught, they make mistakes, they forget about things, they don’t file the right forms or file the right forms on time, and that can cause major, major issues down the road. There is software out there that makes it so easy and it takes care of all those filings for you. It takes care of all those tax payments for you.
So I highly recommend that you use a software even if you’re the only employee as the owner. Use a software to help it out. It’s relatively inexpensive and just makes that whole process easier. one software that we recommend a lot is a software [00:03:00] called Gusto. I have a link in the show notes if you wanna check out more about them.
So that’s what it means.
Payroll Frequency Options
Now, when we talk about options that you have when paying yourself, there’s a few different options. If you have other employees. Just run it on the same frequency as them. This is usually gonna be every other week or twice a month. So if you have other employees, option number one is just run your payroll the same time that you pay our other employees.
Option number 2, 3, 4, and five is you do a monthly payroll. You do a quarterly payroll, or you do an annual payroll, and oftentimes. These are gonna be looked at as potentially a true up option. So we’re gonna talk through what those options look like, and then you have catch ups or what I call slowdowns and maybe even bonuses, and we’ll talk about those at the end and how those factor into your reasonable salary as well.
’cause those are super important. So let’s go through the process of each of these different options, which is just running it with the other employees monthly, quarterly, annually. True up options, catch ups, what that looks like. So let’s first talking about twice a month or monthly. Payroll. [00:04:00] This is, you know, usually the easiest and most common that you would just take your reasonable salary and spread it out over 12 months, or spread it out over 24 pay periods equally.
Oftentimes, if you’re running payroll for other people, this is the easy way. Just take your salary, spread it out evenly over however many pay periods you have, and just run it with the payroll of all your other employees, and then you could just. At the end of the year, adjust up or down, depending on performance.
And if you need to adjust your payroll. So this is the most common, this is the easiest, and it’s often the one that I recommend. Now, why do I recommend it? One, it’s easy to do. There’s a regular cadence that you can just get used to. You’re filing the payroll, you’re paying the taxes, you’re filing the forms.
All that’s gonna being done on a regular basis. You don’t have to remember to do anything. It’s just being done in the background on a regular basis. Now the cons, and we’ll talk about when we look at the other options available.
True-Up Payroll Method
So next we’re gonna talk about true-up options, which is more typical for those that are doing a quarterly or an annual type of payroll.
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Just head on over to tax savings podcast.com/starter kit to grab your free copy. Again, that’s tax savings podcast.com/starter kit. Alright, so let’s get back to the payroll piece. So the next options of how to pay yourself is what I call a true up option, a quarterly or an annual payroll. And typically what this means is that you’re truing up, basically you’re taking draws as needed, but then you’re truing up and making payroll payments at the end of the quarter.
Or sometimes annually we’re gonna talk about why that might not be the greatest method. So you’re taking money outta the business just as you always used to. Draws, draws, draws. And at the end of each quarter, you’re gonna move the reasonable salary portion [00:06:00] into wages and salary. You’re gonna file the payroll tax forms and you’re gonna pay taxes at the end.
Of the quarter. So let’s go through an example of this. Let’s say that you took draws of $15,000 a month for a total of $45,000 for a quarter. So every month you’re just taking money, Ferring money from the business account to your personal account. That’s an owner’s draw. That’s an owner’s distribution of $15,000 per month.
The total for the quarter was 45,000. If your reasonable salary was $80,000, that would be $20,000 per quarter. You would move $20,000. Out of the $45,000 that you took in draws, and you’re gonna move that into wages and salaries, and then you’re gonna run payroll taxes and you’re gonna file the payroll tax forms on it.
This is a method that oftentimes. People that are on top of things. People that have been doing this for a while. Sometimes this is an easier method because they can just every quarter true up. So they’re gonna take money as needed, but then they’re gonna run a true up at the end of the quarter. The positives to this is that you just take money outta the bank account as needed, and then you resolve kind of those details.
Later. [00:07:00] Now, the cons to this, this method, this is very important. I want you to understand it, especially if you’re doing this or you’re thinking about doing this. The cons to this is that you have a big tax check at the end of each quarter, and that can catch you by surprise. You know, you don’t know how many business owners that we’ve seen that say, okay, it’s time to run that payroll, or we talk to them, they decide to go to this method.
It is time to run that true up when we’re moving stuff from, draws into wages and salaries. Now there’s not gonna be a take home pay portion that we gotta figure out, but they still owe the payroll taxes when we make that true up at the end of the quarter. And they say, Mike, I don’t have the cash for it.
Well, what happened to the cash? Oh, I spent it on this and took it all personally. Well, if they were doing this on a monthly basis. That surprise wouldn’t be there because the taxes would be coming out on a regular basis, but because they did a true up, it might catch ’em in a cash flow crunch. So that’s one of the cons.
To this method. The next con is that it’s not technically correct. You know, the, technically you should be on a more regular pay run. You should be, uh, paying yourself as you’re earning those things. So, you know, if you’re, [00:08:00] uh, if you’re working in January, you should be paying yourself in January for that work.
So that’s the technical correct way. Although this has been done for a while, and if you are on a more regular payroll tax filing, you need to file zero return. So let’s say that. Your state or your federal requires a monthly filing of payroll tax forms. Well, even though you didn’t run any payroll for a specific month, ’cause you only ran it every third month at the end of each quarter, even though you didn’t run payroll for a specific month.
If you’re required to do a monthly filing. You still have to file a return and that’s just gonna be a zero return because there was no payroll ran. And in the third month, that’s gonna all show up on there, but you would still need to file that zero return. And so this can sometimes catch people by surprise.
So that’s kind of the other method that we have, which is just a true up. Again, it can be super powerful and a lot of people love this method, but you just gotta be careful because I don’t want to see you getting a cash crunch all because of a timing issue that you weren’t planning for.
Catch-Ups and Slowdowns
The next thing I wanna talk about is what I call catch ups in slowdowns.[00:09:00]
So we want to try to plan out our payroll perfectly, so we don’t take too much or too little. Remember, as an S corporation, the payroll is a piece where we’re paying self-employment taxes, essentially on that payroll. So we don’t wanna take too much and pay too much in self-employment taxes, but we also don’t wanna take too low of a payroll and be on the iris radar for a non.
Reasonable S corp owner salary. So we want to try to plan to make sure that our reasonable salary is perfect. It’s not too much, it’s not too little. If we’re on a regular cadence, sometimes that can be hard. You know, we have big years, we have down years, we have different things. So we need to do what I call catch ups or slow downs.
So if you pay too much in payroll, let’s say it gets to October and you’ve realized, Hey, my reasonable salary is way too much. I haven’t been working as much as I normally do. And you pay too much. Maybe we skip a payroll or two at the end of the year, so maybe we don’t do payroll in November or December because we’ve already hit our reasonable salary.
We don’t need to take any more. Or maybe we’re on the other side. We took too little. You know, we, we are very conservative and all [00:10:00] also, we had a good year. We need to bump up our payroll. We’ve been working a lot. Maybe we took too little payroll now, closer to the end of the year. We need to run a bonus payroll, either as a one-off, or again, taking some of those draws that we took towards the year and moving them to wages and salaries to get the payroll bumped up.
So wherever you’re at, just make sure we always plan to do an analysis. What I always like to say here at the beginning of the year. Let’s plan what that reasonable salary is. Let’s, let’s plan what we think it should be if it’s $80,000, again, look at our resources. We’re gonna do an episode later this year too, that we talk about determining that reasonable salary.
I got a section in my book about this other podcast episodes. We’ve talked about this, but figure out what your reasonable salary is and just kind of guesstimate that. Let’s say it’s $80,000. Great, let’s plan to run $20,000 in payroll per quarter, and then at the end of the year, in October, November, December, we can start to revisit that and say, Hey.
Is 80, right? Or is 80 too much? If eighty’s too much. Okay, let’s skip November and December. Payroll. Now we’re only gonna be down, you know, at 70 [00:11:00] or or 65, whatever it might be. Is 82 little do we really need to be bumping it more closer to a hundred thousand dollars. Okay. At the end of the year, let’s run a bonus payroll.
We’re gonna move some of the drawings that we took throughout the year into payroll, and maybe that bonus payroll gives us to a hundred thousand dollars. Okay, let’s make that move then. So there is options where we can adjust and kind of do that true up at the end of the year or skip a payroll at the end of the year.
But it’s not necessarily something, especially if we’re doing it on a regular cadence, it’s not something we’re doing every single payroll. Now the other thing I wanna talk about, and this is especially for S corp owners, and you know, check out our episode last week. If you’re not an S Corp owner, if you’re on a partnership or you’re in a sole proprietorship, you should not be paying yourself any W2 payroll.
You’re just gonna take owner draws or distributions as you need the funds. You’re not paying yourself an actual W2 payroll. So make sure you’re keeping that in mind.
Self-Employed Health Insurance and HSA Contributions
Now for S Corp owners, one thing I wanna make sure that we’re aware of is this concept of self-employed health insurance and HSA contributions.
So do [00:12:00] not forget this because this is sometimes where people have a misunderstanding and now we’re paying too much in payroll than we really need to. So I always want you to be thinking about this because it’s usually gonna be a year and adjustment. So don’t forget, if you are an S-corp owner and you have self-employed health insurance or HSA contributions, you should run them through.
The business, run those through the business and then. And this is important just for you as an S-Corp owner. This isn’t right what we do for normal employees, but for you as an S corporation owner, you’re gonna take those self-employed health insurance premiums or those HSA contributions and you’re gonna add them to your W2 payroll.
So it’s gonna be an adjustment. You’re gonna contact your payroll provider, you’re gonna add these as payroll, W2 box one payroll. To yourself. But, and here’s the cool thing. They’re not gonna be subject to FICA taxes, Medicare and Social Security, which is also considered self-employment taxes. That amount that you pay in self-employed health insurance and HSA contributions are not subject to FICA taxes, but they’re still gonna be added to box one of your W2.[00:13:00]
So this is a plus for you because you’re gonna add to your reasonable salary, but you’re not paying FICA taxes on that amount you add in there, but that needs to be factored into your payroll. So let’s go through an example. ’cause I helped, I think this helped drives it home. Let’s say that your reasonable salary is $80,000.
But you have $20,000 in health insurance premiums and HSA contributions. You would only plan to run a cash payroll of $60,000. And then at the end of the year, you’re gonna do that adjustment for the self-employed health insurance premiums for those HSA contributions of $20,000 to bring you. To that payroll of $80,000.
So again, let’s go through that example again. ’cause we wanna make sure it’s clear. Let’s say you determine your reasonable salary is $80,000, but you have $20,000 in health insurance premiums that you’re gonna be paying throughout the year. We only wanna run a cash payroll of $60,000 because we’re gonna take that $20,000 in self-employed health insurance at the end of the year.
We’re gonna make a W2 adjustment to add that. To our payroll, but it’s not gonna be subject to self-employment taxes. This is a beautiful [00:14:00] thing, but you still get that $80,000 in reasonable salary. So super important, something you want to factor in as you’re working on that reasonable salary and kind of determining that.
And then just making sure that you do this correctly, because if you do not do this correctly, if you don’t run your self-employed health insurance premium through the business and then add them to your W2. Technically you don’t get a deduction for it with, if you do it the correct way, now you’re getting a tax deduction for it.
And it’s also redu adding to your amount of reasonable salary, but reducing the amount that you pay in FICA taxes, social security, Medicare. Alright, so let’s kinda wrap up this whole concept.
Conclusion and Recommendations
First off, reasonable salary is important. And required for S corp owners, reasonable salary is important required for S corp owners.
That’s step one. Let’s determine what that reasonable salary is. Once we’ve determined that reasonable salary, now we need to to look at a frequency. And so my recommended frequency for the easy method is it just run your payroll the same as all your other employees. Maybe [00:15:00] that’s twice a month. Maybe that’s monthly.
Maybe that’s every other week. Whatever it is, just take your reasonable salary and run it. Just as you do all your other employees, that’s the easy, easy method. That is my typical recommended method because it helps people not get into trouble in a cash crunch. Now, if you are more diligent, quarterly is fine, but you just need to ensure that you’re doing everything on time.
You need to make sure that you have the money available for the tax bill, and so many different things. You know, too many people plan this route and then it comes time. And cash is tied up in other areas. This can be a bad trend to start, and you can get into deep trouble because you’re constantly chasing that ball down the road where you’re paying taxes after the fact.
Many business owners can get into trouble and you don’t wanna mess with payroll taxes when it comes to these types of items. So if you’re in a more diligent area, if you can be more careful if you have a good cash flow, that can be an option to do it quarterly. Just make sure you don’t forget to do it on a regular basis.
Make sure you’re filing tax forms for any periods that you need to file tax forms for, that you didn’t run any payroll. You still need to run a zero [00:16:00] return and then make sure you just have the cash to make those tax payments when you’re making those filings at the end of the quarter. But again, my typical recommendation to most business owners so that they don’t get into trouble, it’s just run it as the same as other employees, whether that’s, twice a month, payroll run every other week or a monthly type of payroll.
So here’s the bottom line. Payroll. Timing isn’t about convenience. It’s about protection. Monthly. Payroll isn’t just safer. It’s smarter.
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Thanks for tuning in to the Small Business Tax Savings Podcast. We hope today’s episode [00:17:00] sparked some brilliant ideas to help you save on taxes and grow your wealth. If you loved what you heard, hit the subscribe button and share the wealth with fellow entrepreneurs. For a treasure trove of tax saving resources, visit tax Savings podcast.com.
There you’ll find tools, guides, and all the info you need on reducing your taxes. Let’s elevate your business to new heights together. Remember the insight shared here for educational purposes and not specific tax or legal advice. Always consult with a qualified professional for your unique situation.
Until next time, keep thriving and saving.