York, Pa. – October 12, 2026 -- Misunderstanding owner classification remains one of the leading causes of payroll errors among small businesses in York, according to David Riggs of Accounting Services of York, LLC, in a HelloNation article. Misclassification leads to incorrect tax payments and potential legal issues, the article says.
S corporation owners who work in the business must generally be on payroll
Under IRS expectations, S corporation owners who work in the business must be paid a reasonable wage before taking any distributions. Failure to comply may trigger audits or penalties, which makes correct payroll setup critical from the start, according to Riggs.
Single-member LLC owners typically take draws, not paychecks
Owners of single-member LLCs are typically not employees and do not receive regular paychecks. Their income flows through draws, and taxes are handled on personal returns. Placing these owners on a traditional payroll schedule can create confusion and payroll errors, particularly during filing season.
The article says many York small business owners wrongly assume all owners should be paid the same way, regardless of business structure.
Pennsylvania employers face multiple layers of payroll tax compliance
Beyond federal withholding, Pennsylvania small companies must manage state income taxes, local earned income taxes and unemployment contributions. Filing deadlines and deposit schedules depend on business size, and late filings can become costly. The article recommends reliable payroll software or a professional accountant to keep filings on track.
Records of pay stubs, deposits and filings ease compliance
The article advises businesses to retain pay stubs, tax deposit receipts and filing confirmations. These records support compliance, simplify year-end reporting and provide a clear breakdown of expenses and compensation across the business.
Business owners are urged to clarify classification at the outset and review both IRS and Pennsylvania guidelines.