S-Corp Shareholders and Unemployment Insurance
Many corporation officers find it surprising that even though they are "owners" of a company, they still may be subject to paying unemployment insurance (UI) premiums and taxes on the wages that they paid to themselves. This is true for shareholders of an S corporation in particular, as they are considered both shareholders and employees of the corporation. Any W-2 income a shareholder receives is considered employee compensation subject to the taxation rules shared by other employees.
In terms of federal income tax withholdings for S-corporation employees, shareholders, and corporate officers, the IRS says:
Colorado, just like other states, follows the FUTA (Federal Unemployment Tax Act) definitions for officer wages. The following excerpt is from the Colorado Department of Labor & Employment (CDLE) FAQ, "Are corporations liable to pay unemployment insurance premiums on corporate officer's wages?"
Yes. Corporate officers are considered to be employees of the corporation and their wages are chargeable along with any other remuneration in lieu of wages such as dividends ("S" corporation only), bonuses, draws, or distributions.
In another FAQ answer, CDLE further explains the reasoning for corporation officers to pay UI premiums:
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