Compensation query

As the tax deadline nears, make sure you are compensated correctly in the eyes of the IRS.

Are you an employee of your nursery? More importantly, at least to lawmakers and the Internal Revenue Service, does your business properly compensate you (the owner/employee) for the services that you provide to the business?
 
A number of factors contribute to the confusion that this simple question often triggers. With a sole proprietorship, all income from the nursery business goes into the owner's pocket, while expenses are paid from those pockets with anything left labeled as profits and taxes paid. Although a sole proprietor is often legitimately called an "employee" of the business, in reality, the owner is the business. 
 
Wages and Dividends
When a separate business entity enters the picture, things begin getting confused for tax purposes. Questions about salaries paid to the owner/employee; whether payroll taxes have been — or should have been — withheld; should those distributions have, more accurately, been labeled as dividend payments; or will the business be penalized if it keeps profits within the business rather than paying them to the owner/employee as wages or dividends?
 
Generally, every owner/employee of a profitable nursery should receive amounts labeled as both wages and dividends. The business can reward owner/employees with both bonuses and fringe benefits, although favoring the owner/employee at the expense of others within the business is a definite no-no in the eyes of the IRS.

Read the rest of the story here: http://www.nurserymanagementonline.com/nm0112-business-tax-laws.aspx