If you run your Maine-based business operations through two or more corporations, the different entities may share some of the same employees. If so, you may be able to save payroll taxes by using a common paymaster. This means that instead of having each business pay Social Security and Medicare tax for shared employees, the appropriate amount of tax is remitted just once.
In other words, no more tax would be paid than would be the case with a single employer. The savings apply to employees who on a combined basis earn more than the Social Security tax wage ceiling, which for 2014 is $117,000.
As an example let’s say you have two corporations equally sharing a business manager who earns $140,000 a year and collects two different $70,000 paychecks. If each company pays Social Security tax for the manager, each separate Social Security tax bill is $4,340 (6.2 percent of $70,000) for a total of $8,680.
If a common paymaster takes over in 2014, however, the total Social Security tax bill is limited to $7,254 ($117,000 times 6.2 percent), resulting in a savings of $1,426.
You can only take advantage of this calculation when related corporations employ a worker concurrently, and there are some restrictions on what constitutes a related corporation. And the common paymaster option is only available to corporations. Sole proprietors and partnerships are not eligible. Ask Filler & Associates for more information.