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Is a FUTA Return Required for the Owner of an S Corporation?

Federal Unemployment Tax is due each year for every company that has W-2 wage employees. The taxes you deposit for FUTA allows the federal government to assist state unemployment agencies with extra funding for unemployment compensation claims. As the owner of an S-corporation, you are required to pay FUTA taxes for yourself, based on Internal Revenue Service compensation laws.

 

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Owner Compensation

As a working owner of an S-corporation, you must receive a wage from your company. This is required for all corporate officers who perform services for the company, regardless of the percentage of business owned. Wages are subject to state and federal unemployment tax, even if you are the only employee of the S-corporation. The IRS has an annual wage limit of $7,000 per employee subject to federal unemployment. If you earn more than this amount from your S-corporation, only the first $7,000 will be taxed. Wage limits for FUTA do not extend to any other sources of income you derive from the S-corporation, including distributions, dividends and shareholder loan repayments.

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Please note: Our explanation that are provided on our web site for "How to Calculate Futa and Suta taxes" are only meant to provide general guidance and estimates about the payroll process. They should not be relied upon to calculate exact taxes, payroll or other financial data. You should consult with a professional advisor or accountant regarding your specific payroll concerns.

 


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