Certified Payroll for Owner, S Corp

[SSDriver]

Is there a way to keep the money I make off of a DIR project in my company (S. Corp, and I'm the owner) and not pay myself with a check. I know I still have to do the certified payroll report but I don't want to write myself a check for that full amount. I much rather keep most of it in the company to have it grow. My income for the project is over the pay rate for my classification for the work on that job. Thanks for any help.

The only thing they say about it on the DIR web site is

"
Q: I am an owner/operator, sole proprietor, or business owner, and I do not receive payroll checks or pay myself an hourly salary. How do I handle certified payroll reporting for my own work, and how do I determine how much I am being paid for that work?

A: Even if you are paid by salary, draw, or contract payments, you still should be able to provide the following information for any work you perform on public works projects: (a) your name, address, and SSN (or FEIN, if you have no SSN); (b) the work classification for your prevailing wage work; (c) the hourly rate for that classification; (d) the number of hours that you performed that work; and (e) the estimated amount paid to you for your labor for that work. To calculate how much you were paid for your own labor, subtract all your other expenses (including materials, pro rata share of business overhead, and payments to other workers or subcontractors) from the gross contract price. The net amount should be your labor cost, and it should be equal to or higher than the compensation required for your work classification (determined by multiplying your work hours by the applicable rates) in order to comply with prevailing wage requirements.
"
I'm not quite sure how to comply with this and have proof. How do you guys do this?

 

[ptonsparky]

Talk to your accountant.

eta: What is DIR? (I found several but was too lazy to chase more than a page or two>)

 

[romex jockey]

How do you guys do this?

I <think> i know what you're asking....

A type S corp has a flow through tax structure

for ex., you can simply pay yourself the same amount 52 weeks a year, BUT if your books show a phenomenal profit, they will be inclusive in your overall personal taxation .....

So....checking books in the 4th 1/4 for this windfall to become a write off is what helps you 'keep the $$$' , just as company assests

~RJ~

 

[kwired]

If I understand you are doing some project where they want to ensure prevailing wages are paid to workers on that project, and you are concerned with how to report your own earnings, at least as related to that project, yet since you are the owner you don't exactly pay yourself an hourly wage.

AFAIK all they want is to show no workers were paid less than prevailing wage, you can not pay yourself too much here but you can pay yourself too little and cause problems with the system. Chances are you are making enough profit that you can justify making at least the prevailing wage minimum. This likely is no IRS reported information so will not directly effect your income taxes in the end regardless of what you put on any reports here. Is probably just a bunch of red tape that goes with a government funded project more than anything. Give them what you would pay yourself if you were paying yourself hourly, and how ever many hours you would have paid yourself.

 

[Ravenvalor]

You should be able to do just that.

 

[Gary11734]

Are you working directly on the site, or off-site?

 

[Gary11734]

I <think> i know what you're asking....

A type S corp has a flow through tax structure

for ex., you can simply pay yourself the same amount 52 weeks a year, BUT if your books show a phenomenal profit, they will be inclusive in your overall personal taxation .....

So....checking books in the 4th 1/4 for this windfall to become a write off is what helps you 'keep the $$$' , just as company assests

~RJ~

No such thing as a windfall in a Sub-S. You still have to report any profit on your W-2 through K-1

 

[Gary11734]

No such thing as a windfall in a Sub-S. You still have to report any profit on your W-2 through K-1

If you take distributions, you can get by with not withholding SS taxes. But, it will hurt you in retirement since no income will show up for those years...

 

[SSDriver]

Are you working directly on the site, or off-site?

Yes I am working directly on site. I will be the only worker unless they send me a union apprentice.

 

[kwired]

No such thing as a windfall in a Sub-S. You still have to report any profit on your W-2 through K-1

If you take distributions, you can get by with not withholding SS taxes. But, it will hurt you in retirement since no income will show up for those years...

If this is about what I think it is about, nobody cares about profits, losses, or end of year income - it is about assuring workers on the particular project were paid a certain minimum wage per hour on this particular project. If a salaried person or an owner like OP is that has a little different pay arrangement than a typical hourly paid employee does is involved then one has to provide some sort of proof of hours worked and the amount of compensation they made on that project and equate it to "wage per hour" for that project only. A person could have easily left that site and taken the afternoon to work on some other project and received minimum wage or even no wage and it won't matter. (no wage might be more likely for the owner than most other employees, as he might do something "pro bono" for various reasons or even follow up on warranty items for previous projects that are possibly going to be nothing but pure losses for that visit, that goes with being an owner at times.

 

[Ravenvalor]

At the end of the year if your s-corp shows a profit it will be taxed for the profit that you show. I do not know what the tax rate is or how it is calculated.

 

[Gary11734]

At the end of the year if your s-corp shows a profit it will be taxed for the profit that you show. I do not know what the tax rate is or how it is calculated.

That tax rate is based on the amount of income (profit) that shows through your K-1. That income is now part of your W-2. The tax rate is applied now to your personal income tax.

 

[Gary11734]

If this is about what I think it is about, nobody cares about profits, losses, or end of year income - it is about assuring workers on the particular project were paid a certain minimum wage per hour on this particular project. If a salaried person or an owner like OP is that has a little different pay arrangement than a typical hourly paid employee does is involved then one has to provide some sort of proof of hours worked and the amount of compensation they made on that project and equate it to "wage per hour" for that project only. A person could have easily left that site and taken the afternoon to work on some other project and received minimum wage or even no wage and it won't matter. (no wage might be more likely for the owner than most other employees, as he might do something "pro bono" for various reasons or even follow up on warranty items for previous projects that are possibly going to be nothing but pure losses for that visit, that goes with being an owner at times.

If this is Davis-Bacon work, beware! Screwing around with the feds have put people in the slammer...

 

[kwired]

If this is Davis-Bacon work, beware! Screwing around with the feds have put people in the slammer...

I'm not suggesting to intentionally falsify anything, but all they are interested in is what hourly rate or some equivalent each worker on that project was paid.

As an owner say you collected $10,000 total for the project, but after calculating your expenses as they relate to that project and finding the difference is $6000, the most you could have earned as wages is $6000, but even then your material markup technically is not wages it is other profits, this issue is about ensuring all workers made at least a certain minimum wage that corresponds to the type of work performed and possibly experience level they have in the trade. As long as you don't make up something that is ridiculous you are probably fine. You are not going to get any kind of audit over this if what is submitted seems reasonable, and they probably won't look as hard at an owner's reported wages as other employees anyway.

Is possible that OP being a one man show made a poor bid and shorted himself, maybe not a net loss but certainly not intended amount of profit on the job. How you supposed to pay yourself the required amount when what you get paid is fixed by the contract in the first place? Steal from yourself from other projects that aren't being monitored by this to pay yourself those missing wages? It is still falsifying things for the project in question and bottom line is if you underbid you still have to pay any hired employees prevailing wage and if that means a net loss your wages as an owner are also a net loss in reality.

If you don't have a timeclock so to speak it is hard to prove how many hours were spent on said project in the first place. If you have hourly rate employees there likely will be decent methods of tracking hours. It will be salaried employees that will be trickier to prove hours and wages as related to the project if you don't have good documentation methods.

 

[Gary11734]

Are you matching up with certified Payrolls? That will be the audit. That is what the feds are looking at. One employee that is carrying a piece of pipe and you classify as a carpenter, you're going to the slammer if the guy belly aches... Or, at least, you end up paying the helper JW wages as stipulated on the Davis Bacon sheet for that project. You would classify yourself as the highest classification for your trade. If you do that, no problem. I've seen wives of contractors go to jail for falsifying certified payrolls, and it was the husband's business. The feds don't care who they throw in the slammer. Also, they could care less you screwed up your bid. "You wanted to be a contractor"! I've seen so many go down on this. I bid the full rate for everyone. If I lose the job, the best thing that happens to me that day. It's wonderful coming in second on a Davis Bacon Project!

 

[Austin75]

The owners of a corporation or an S corporation are shareholders, but owners of an S corporation pay tax on the income of the corporation differently from owners of a C corporation. A C corporation pays corporate tax on its net income on a corporate tax return, and it pays dividends to the shareholders.

As an S Corp shareholder, you are not required to pay Social Security and Medicare taxes on distributions; but you are required to pay these taxes on a W-2 salary. So obviously the IRS wants to collect these taxes on your compensation

 

[oldsparky52]

I'm with kwired. This is only about making sure the employee is getting the wages they are supposed to be getting. The OP owner may have to pay the OP worker a higher wage while on this job than he does on other jobs. This has nothing to do with the IRS or how taxes are paid/collected except that if the OP owner may have to pay some SS taxes for the OP worker that he might not have to pay if this was not a certified payroll project.

My money says the OP worker is not earning what he should (for this project) be and isn't sure how to deal with it.

On a side note, if the owner of the S corp does not pay himself a reasonable wage for working, you could get an audit.

 

[gadfly56]

I'm with kwired. This is only about making sure the employee is getting the wages they are supposed to be getting. The OP owner may have to pay the OP worker a higher wage while on this job than he does on other jobs. This has nothing to do with the IRS or how taxes are paid/collected except that if the OP owner may have to pay some SS taxes for the OP worker that he might not have to pay if this was not a certified payroll project.

My money says the OP worker is not earning what he should (for this project) be and isn't sure how to deal with it.

On a side note, if the owner of the S corp does not pay himself a reasonable wage for working, you could get an audit.

Not a reasonable wage, he must show he paid himself the prevailing wage, whether for Davis-Bacon or the state prevailing wage, depending on the project. And it isn't about your normal job classification, it's about the work performed. I helped my techs pull wire for about 4 hours on a D-B job, and technically I should have been paid D-B wages for those 4 hours even though I was a salaried, exempt employee. There is no "de minimus" time that doesn't have to be accounted for under the Davis-Bacon Act.

 

[oldsparky52]

Not a reasonable wage, he must show he paid himself the prevailing wage, whether for Davis-Bacon or the state prevailing wage, depending on the project. And it isn't about your normal job classification, it's about the work performed. I helped my techs pull wire for about 4 hours on a D-B job, and technically I should have been paid D-B wages for those 4 hours even though I was a salaried, exempt employee. There is no "de minimus" time that doesn't have to be accounted for under the Davis-Bacon Act.

I agree and tried to state it by saying

This is only about making sure the employee is getting the wages they are supposed to be getting. The OP owner may have to pay the OP worker a higher wage while on this job than he does on other jobs.

. When I said

On a side note, if the owner of the S corp does not pay himself a reasonable wage for working, you could get an audit.

I was talking about with the IRS, but since I didn't state that you couldn't know. I'll try to get better at communicating.

 

[gadfly56]

I agree and tried to state it by saying . When I said I was talking about with the IRS, but since I didn't state that you couldn't know. I'll try to get better at communicating.

As long as they get their cut, one way or the other, the IRS doesn't care how you move the money around. The only case where certified payrolls are required, to my knowledge, are for federal or state prevailing wage jobs. In that case, the state or the feebs don't care how you dance with the taxman, they want to know that Joe's pay-stub, whether he's the owner of the business or a day laborer, shows that Joe was paid the prevailing wage for any prevailing wage work he performed during the pay period. If Joe owns the (S-corp) business he can't pay himself a dollar an hour and take the rest as some kind of distribution.