The difference between C & S Corporations for dividend payments and gross proceeds payments as far as I can make it out to be:
For dividend payments it does not matter if it is a “C” Corporation or a “S” Corporation as they are treated the same for withholding and reporting – they are exempted from withholding and reporting.
For gross proceeds (sales) the “C” Corporation is exempted from withholding and reporting, however, the “S” corporations is subject to withholding (28%) and reporting on sales beginning in 2012.
I found this IRS tax tip quite interesting as it relates to third party tax functions and peovides a reminder to this people and companies who outsource that at the end of the day THEY are responsible for any tax debts and NOT the third party provider.
That is why tax forms for the CRA, MRQ and IRS require a signature.
So they have someone to hold liable.
Intaxicating tax tip: If you’re not sure, or do not understand what is contained on a form, slip or return. do NOT sign it!!!
Here is the IRS release:
Three Tips for Employers Outsourcing Their Payroll
Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities.
Recent prosecutions of individuals and companies who – acting under the guise of a payroll service provider – have stolen funds intended for payment of employment taxes makes it important that employers who outsource payroll are aware of the following three tips from the IRS:
1. Employer Responsibility. The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward the tax payments to the third party to make the tax deposits, you – the employer – are the responsible party. If the third party fails to make the federal tax payments, the IRS may assess penalties and interest. The employer is liable for all taxes, penalties and interest due. The IRS can also hold you personally liable for certain unpaid federal taxes.
2. Correspondence. If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business (I do not necessarily agree with this as a good third party providor will either eat any penalty charged or should be providing updates to their client including copies of notices as part of thier day-to-day process.
3. EFTPS. Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.
Information on EFTPS is available on the IRS web-site. The staff in the EFTPS are are VERY knowledgable and VERY friendly. Trust me… I know.