Compensation to Employee Question

ShannonSanford

Good Afternoon!

The company for which I work recently purchased another firm.  With that, the previous President is now an employee of our firm.  He is paid salary and earns commissions based on sales.  We pay him the base salary via payroll like every other employee, however he wants his commission payments paid to his other corporation.  Our firm pays him as an employee therefore the earnings should be reported as income for the past-president and taxes should be deducted.  He doesn't not want ANY taxes deducted from his commissions paid to the corporation.  To cover ourselves, we are reporting the commissions as earned income to HIM directly and we remit the appropriate Employer tax liabilities.

Prior to seeking legal counsel, I wanted to post to see if anyone had any experience with paying someone in this manner.  I want to ensure our firm is covered legally.

Thank you!

TXHRGuy

He would have to claim exempt on his W-4 or convert to contractor status through his other corporation, which then becomes his tax problem and not yours.  He's an employee.  Everything you pay him for work performance must go through payroll.