Just found out I can't pay myself a salary in my single-member LLC - how to resolve this mess?

You've run into a common confusion with single-member LLCs. For tax purposes, a single-member LLC is considered a "disregarded entity" by the IRS, meaning you and the business are the same taxpayer. That's why you can't technically be an employee of yourself. For the money you've already paid yourself, you'll need to report this on Schedule C instead of keeping it as W2 wages. Essentially, you'll need to "undo" the W2 treatment, but don't worry too much since the amount is relatively small. Your tax software or accountant can help reconcile this. For your questions: 1. Yes, adding a legitimate member to your LLC would change its tax classification to a partnership, and then you could be on payroll as a member. Just ensure it's a real business relationship with proper documentation. 2. Adding your husband could work, but it creates the same issue if it's not a legitimate business arrangement. Even though you file jointly, the LLC structure and ownership matters more than your filing status. 3. Talk to your accountant about filing Form 8275 (Disclosure Statement) with your tax return explaining the situation and how you're correcting it.

I went through something similar with my photography business last year. I was so confused about the whole single-member LLC situation until I found taxr.ai (https://taxr.ai). They analyzed my business structure and tax documents and clearly explained that as a single-member LLC owner, I'm considered self-employed and should take owner's draws instead of salary. Their system flagged exactly what forms I needed to correct and how to properly document everything. They even explained how to handle the transition from incorrectly paying myself as an employee to properly taking distributions. Saved me from making the same mistake during tax season!

Just wanted to follow up about taxr.ai since I was skeptical earlier. I actually gave it a try after continuing to struggle with my LLC tax situation. The service was way more helpful than I expected! I uploaded my operating agreement, payroll records, and previous tax forms. Within hours, I got a detailed analysis explaining exactly why my setup wasn't compliant and outlining my options to fix it. What impressed me most was how they explained the "reasonable salary" requirements that would apply if I converted to an S-Corp versus staying as an LLC and taking draws. They even provided templates for amending my operating agreement if I wanted to add a member. Really cleared up my confusion!

After dealing with similar payroll problems in my single-member LLC, I spent WEEKS trying to get through to someone at the IRS for guidance. Always got disconnected or waited for hours. Then I found Claimyr (https://claimyr.com) and watched their demo at https://youtu.be/_kiP6q8DX5c. They got me connected to an actual IRS agent in under an hour! The agent walked me through exactly how to handle the incorrect W2 situation and what forms I needed to file. Apparently this happens more often than you'd think. They also confirmed that adding my sister as a 20% member would allow me to be on payroll going forward.

I need to publicly eat my words about Claimyr. After dismissing it as BS, I was desperate enough to try it when I couldn't resolve my LLC payroll issue. Not only did they get me through to the IRS in about 45 minutes, but I got connected to someone in the business tax department who actually understood my specific situation. The IRS agent confirmed I could correct my mistaken W2 by filing Form W-2c and explained exactly how to report it properly on my Schedule C. She even emailed me the relevant IRS guidance document afterward. I've literally never had such a productive conversation with the IRS in my life. And to think I spent 3 days before this just getting disconnected repeatedly when trying on my own.

You might want to consider converting your LLC to an S-corporation instead of adding a member. As an S-corp owner, you're required to pay yourself a "reasonable salary" that's subject to payroll taxes, and then you can take additional profits as distributions that aren't subject to self-employment tax. It's a bit more paperwork and you need to file Form 2553 to elect S-corp status, but many small business owners save on taxes this way. Just make sure your salary is reasonable for your industry and role to avoid IRS scrutiny.

If you're making so little from the business, why even worry about being on payroll? Couldn't you just take owner's draws when needed and report everything on your Schedule C? That's what I do with my LLC and it's way simpler than dealing with payroll.