Paying Yourself
Paying Yourself : For Sole Proprietors

Paying Your Employees (and Uncle Sam)

Your first obligation is to pay your employees, and with them, Uncle Sam.

  • Calculating Payroll Taxes

    • The calculator above does not calculate tax on tips. If your employees are paid tips, please review:

  • Employee Tip Income

    • Use the following forms to pay taxes to the government (usually a monthly requirement for new businesses):

  • EFTPS Deposit for Federal Payroll Taxes

    • Paying Yourself (and Uncle Sam)

    Now you have to pay the owners. Business owners can make "draws" of any amount they want. However, they have to pay taxes on all their net profits each quarter - regardless of whether they withdrew the money. There is also a 15.3% social security tax that is added each quarter.

    How can you make sure you'll have enough money at quarter-end to pay taxes? One way is to use the "gross-up" feature of a payroll calculator.

    • Because most sole proprietors don't pay themselves regularly, you need to take the amount that you want to withdraw for yourself (the after-tax amount) and divide it by (5 times the number of weeks the pay is for).
    • Enter that amount in the payroll calculator www.payroll-taxes.com/calculators-link.htm and select daily pay.
    • Then estimate the allowances that you would take if you were an employee.
    • The calculator will determine the taxes that you need to pay on that amount and give you a gross total (the amount you'll keep plus the taxes you need to pay).
    • All you need to keep track of is the taxes. Multiply the results of the taxes by (5 times the number of weeks the pay is for) to get the total.
    • Make sure you have reserved this amount for your quarterly tax payment.

    Your taxes are paid quarterly. Please see Quarterly Requirements.

    Paying Independent Contractors

    Pay independent contractors using the same systems as you do for other vendors. Do not ask for time-sheets or pay them with your regular employees.

    Paying Yourself : For Partnerships

    Partners can make "draws" of any amount they want. However, partners have to pay taxes on all the partnership's net profits each quarter - regardless of whether they withdrew the money. There is also a 15.3% social security tax that is added each quarter.

    How can you make sure you'll have enough money at quarter-end to pay taxes? One way is to use the "gross-up" feature of a payroll calculator.

    • Because most business owners don't pay themselves regularly, you need to take the amount that you want to withdraw for yourself (the after-tax amount) and divide it by (5 times the number of weeks the pay is for).
    • Enter that amount in the payroll calculator www.payroll-taxes.com/calculators-link.htm and select daily pay.
    • Then estimate the allowances that you would take if you were an employee.
    • The calculator will determine the taxes that you need to pay on that amount and give you a gross total (the amount you'll keep plus the taxes you need to pay).
    • All you need to keep track of is the taxes. Multiply the results of the taxes by (5 times the number of weeks the pay is for) to get the total.
    • Make sure you have reserved this amount for your quarterly tax payment.

    Your taxes are paid quarterly. Please see Quarterly Requirements.

    Paying Uncle Sam online

    If you would like to pay online, review the information below:

    Paying the IRS online

    Paying Independent Contractors

    Pay independent contractors using the same systems as you do for other vendors. Do not ask for time-sheets or pay them with your regular employees.

    Paying Yourself : For Limited Liability Companies

    LLC members can make "draws" of any amount they want. However, members have to pay taxes on all the LLC's net profits each quarter - regardless of whether they withdrew the money. There is also a 15.3% social security tax that is added each quarter.

    How can you make sure you'll have enough money at quarter-end to pay taxes? One way is to use the "gross-up" feature of a payroll calculator.

    • Because most business owners don't pay themselves regularly, you need to take the amount that you want to withdraw for yourself (the after-tax amount) and divide it by (5 times the number of weeks the pay is for).
    • Enter that amount in the payroll calculator www.payroll-taxes.com/calculators-link.htm and select daily pay.
    • Then estimate the allowances that you would take if you were an employee.
    • The calculator will determine the taxes that you need to pay on that amount and give you a gross total (the amount you'll keep plus the taxes you need to pay).
    • All you need to keep track of is the taxes. Multiply the results of the taxes by (5 times the number of weeks the pay is for) to get the total.
    • Make sure you have reserved this amount for your quarterly tax payment.

    Your taxes are paid quarterly. Please see Quarterly Requirements.

    Paying Independent Contractors

    Pay independent contractors using the same systems as you do for other vendors. Do not ask for time-sheets or pay them with your regular employees.

    Paying Yourself : For Corporations

    Paying Your Employees (and Uncle Sam)

  • Calculating Payroll Taxes

    • The calculator above does not calculate tax on tips. If your employees are paid tips, please review:

  • Employee Tip Income

    • Use the following forms to pay taxes to the government (usually a monthly requirement for new businesses):

  • FICA and Federal Income Tax Payment Coupon

    • Paying Yourself, your employee/shareholders (and Uncle Sam)

    You and other working shareholders are employees who get paid using the same forms and tools as your regular employees.

    Paying Independent Contractors

    Pay independent contractors using the same systems as you do for other vendors. Do not ask for time-sheets or pay them with your regular employees.