Year-End Payroll for S-Corp Owners: How to Reclassify Draws to W-2 Wages Using Gusto

Mentioned in this video: Gusto: www.claracfo.com/gusto RC Reports: www.claracfo.com/rcreports If you're an S-Corp owner who has ONLY taken draws throughout the year and hasn't yet paid yourself in W2 wages, it's crucial to reclassify some or all of those draws as W-2 wages to meet IRS requirements and avoid penalties. In this video, Hannah guides you step-by-step on how to run an end-of-year payroll using Gusto and explain its financial statement impact. Learn best practices for paying yourself reasonable compensation and ensure compliance with S-Corp regulations. In this video you will find: 0:00 - Intro: Year-End S-Corp Payroll 0:34 - Why Reclassify Draws 1:03 - Client Example: S-Corp Transition 2:00 - Reasonable Compensation Basics 3:33 - Determining Compensation 5:08 - Prepping for Payroll Adjustments 6:33 - Reviewing Financials 7:46 - Running Payroll in Gusto 9:11 - Tax Considerations 12:15 - Avoiding Payroll Mistakes 13:14 - Journal Entries & Taxes 15:00 - Final Financial Review To learn more about CFO services for B2B services providers making over $1M in annual revenue, go to: https://claracfo.com/services Here are some of the tools I trust and recommend to help you manage your business finances more effectively. These are affiliate links, which means I may earn a small commission if you use them—at no extra cost to you. Thank you for supporting the Clara CFO channel! 🔢 QuickBooks Online – 30% Off for 12 Months plus 30-day Free Trial https://claracfo.com/QBO Get organized with the most popular small business accounting software. 🏦 Relay Bank – Get a $100 Bonus https://www.claracfo.com/relay Modern banking designed for business owners. Sign up and deposit $100 to claim your bonus. 👥 Gusto Payroll – Earn $100 https://claracfo.com/gusto Run payroll and receive a $100 reward—perfect for growing teams. 💰 Monarch Money – Extended 30-Day Free Trial https://claracfo.com/monarch Smart personal finance software for entrepreneurs and families. 📊 RC Reports – Get $50 Off a Compensation Report https://claracfo.com/RCReports Ensure your S-Corp salary is IRS-compliant with a professional comp report. Hannah Smolinski is a #CPA and the Founder of Clara CFO Group. Find out more about Clara CFO Group at https://claracfo.com/ Disclaimer: This video is intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Clara CFO Group, LLC is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.