August 08, 2008
Question of the Week: Can Sole Proprietors Pay Themselves Wages?
Filed under: News
Vision Payroll

This week’s question comes from Jon, a sole proprietor: I run my business as a sole proprietorship. Can I pay myself wages and withhold taxes? Answer: Sole proprietors are considered self-employed and are not employees of the sole proprietorship. They cannot pay themselves wages, cannot have income tax, social security tax, or Medicare tax withheld, and cannot receive a Form W-2 from the sole proprietorship. They may receive a draw from the sole proprietorship and must pay quarterly federal estimated tax payments to cover the amount of federal income tax and self-employment tax liability they will have, unless covered by withholding on other income. Vision Payroll can work with you and your CPA to determine an appropriate draw and estimated tax payment schedule. You can then receive the draw as a check or direct deposit with each payroll and schedule appropriate deductions such as retirement plan contributions. Contact Vision Payroll today to get started.


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