Accountants

[24/7]

Hi,

My accountant called mne yesterday to tell me that I needed to start taking salary, and that I should take at least $50k by year end. He stated that I would only get about 25% paid to me and the rest in taxes, social payment and medicare!
I am here on E2 visa and have been for 2 years. I always just take owner benefit. Does this sound right to you, any thoughts would be well received.

[davidmartin_uk]

Owner benefit is salary and you should be paying all the above deductions on anything you take out. The only way you can have money from the business tax free is through Officer Loans where the company pays you back the money you lent it to start up.

The 25% figure is also completely wrong. You are not taxed 75% in the USA!!! Dump your accountant; he doesn't know what he is talking about!!!!!

Dave

[24/7]

Thats exactly what I thought with regard to the Directors loans, I can take any money back until that account is clear. I am wondering why he has come up with that unless it is to cover an error that they may have done?

I was not pulled up on this when I went for my E2 after just a change of status 2 years ago, but I have to renew in December. Do they look for owner payments to the feds and deductions for owners. I have no worries on renewal, we have a good turnover a profits and 6 employees.

[chris]

Director loans? A double edged sword. Get your won money back and no tax implications -- great until you want to apply for a mortgage, etc. Your tax return says you didn't earn enough.
Been there, done it got the tee shirt.
I can't turn the clock back, but for anyone else, do it the traditional way with taxable salary, etc.

[24/7]

I think my point was do I HAVE to take salary and do the IRS look badly at me if I dont pay into the system that will never benefit me.

I do not need mortgages or laons, so not really worried about having to prove a salary.
Just need thoughts on if this will ever count against me at any renewal of E2?
Thanks

[chris]

The IRS will only be p****d with you if you have deliberately not paid your taxes, that's all they are concerned with. However it may well affect you as far as E2 renewal goes. The embassy in London especially is hot on salary & benefits from the business. As with any E2 Visa you have to meet the criteria for that Visa. The guidelines are published on the London Embassy website. Unfortunately there is no 'set in stone' amount and what that is depends on who you talk to and what personal spin the adjudicating official at the embassy puts on the guidelines.
Under the guidelines you have to be more than a marginal business and you have to have economic impact, whether that be direct jobs or indirectly (though the embassy tends to focus more on direct jobs created). To substantiate that at renewal you have to have proof of employees and income. The latter is usually through tax returns.
You can try and fudge it with the embassy, but don't hold your breath at a successful renewal. If the US let us in, they want to see 2 things happen - USC's get jobs and the investor paying taxes.

[timjotom]

Just been to renew our visa in Barbados and the officer focused on the amount of income we drew from the business to live on! That was the main focus of his questions and were we drawing enough to survive.

[davidmartin_uk]

Also the officer loans can't go on forever. Once you have been paid back by the company thats it!

Dave

[24/7]

Of course, when they are paid back then I will take the salary. It is not avoiding the tax, just dont see why I should pay them if there are legal ways not to until such a point when Director loans are gone.

Tinjoton, how was the experience in Barbados? We are booked for December 7th. How many weeks prior to the interview did you submit the paperwork, and did your passports get back quickly? How many years did you get?
Thanks

[Joanie]

Our accountant advised us to both be employees from day one. We had our two W2's and 4 1099's when we renewed and got another 5 years with no problem.


Yes, we have to pay SS, Federal Witholding and Medicare every month, but we know, from talking to many other people either on a E2 or E2 status, that we are in the minority. They all just take dividends. It has made us think - who is being stupid - and I have come to the conclusion it is us!!! I a mvery tempted to take us both off salary.

If others can get renewals without W2's, then why bother??

[dip your toe]

I always think it looks good if you have capital invested ( at risk ) in the business when it comes to renewal time. Either through initial investment or retained earnings

[peter gold]

Tab G ( Marginality) for a renewal MUST CONTAIN ALL W-2"s OR 1099 FOR THE PAST YEAR
Good Luck if you apply without a W2

[24/7]

As usual, there are those that state the obvious and look on the bad side of a renewal. For info, I have a total of 32 1099's and 6 full time employees on W2's.

[davidmartin_uk]

I can never see why it makes any difference the way you pay yourself. If your company lets say makes $100,000 nett profit before your take and you then pay yourself $50,000 it is irrelevant whether this is salary of officer loan. The company still makes a profit of the remaining $50k and you get an IRS return saying that. Officer loans are a perfectly legitimate way of paying yourself and can be properly documented.

I would carry on doing what you are doing now.

Dave

[chris]

24/7's original question was about should he take a salary given his Accountants advice and would it cause problems with the IRS.
I think those questions have been answered, but the question mark over whether shareholder loan in lieu of taxable salary would be acceptable form a Visa renewal standpoint would be acceptable was raised. I don't think there is anyone 'looking on the bad side', just highlighting a potential grey area. If people choose to ignore that highlight, that is their choice and the renewal interview will be the final arbiter.
There appears to be one view that says that visa holders are already doing that and being renewed and another opinion that says it is not the wisest move. There are also the comments that does it matter?
Well, IMHO, when it comes to renewal it matters not what we think personally, it matters only how the adjudicating officer views it. If they don't like it and deny then all the personal opinions in the world count for nothing.
I am the first to highlight the fact that what we are expected to do by way of running our businesses does not make commercial sense most of the time (ie, keeping jobs going when they are not economically viable), but the requirements for successful visa renewal override that, whether they make commercial sense or not.
This is where the frustrations come into play.

[peter gold]

24/7
As usual, there are those that state the obvious and look on the bad side of a renewal. For info, I have a total of 32 1099's and 6 full time employees on W2's.

24/7
All I was doing was quoting the Rules as set out in the London Consuls web site. I am not looking on the bad side I was trying to be helpful but obviously by your attitude you will only listen to an answer when it is one you want to hear.
It is replies such as yours which has constrained me from posting much of late!