Employee or Not

[David M]

I've started a small (one man) corporation to perform real estate investing and perform other small business within. Since the corporation is new Officers (me) have not been paid a salary, the comapany has not filed any employer taxes, nor has a W-2 been taken from any officers (me). Does the IRS still consider me an employee of the corporation though? This is important since I am filing an Offer in Compromise for 1999 taxes on my personal return, but am saying I am unemployed in 2000 since I am not receiving any compensation from the corporation that I am an officer of.

 

[JETX]

And what will you say if you are audited and the IRS says, "And how do you pay your bills?". Then, you might find yourself subjected to a 'detailed' audit (you don't want that!!) where they will examine every bank deposit and check written, cash payouts, etc. Not even talking about a corporate audit.

Now, if you are prepared for these questions and have good enough answers to satisfy the IRS, I say go for it!

However, another thing to be careful of, is that your Corporate standing could be legal jeopardy if you are using corporate funds to pay your personal expenses (mortgage or rent, car, groceries, etc.) Under a corporate debt lawsuit, it could be decided that the corporation was an 'alter ego' of you personally, making YOU personally liable for the corporate debt.

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Steve Halket
Judgment Recovery of Houston
[email protected]
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This is my PERSONAL OPINION and is not legal advice! Consult your local attorney for your specific situation and laws!