An owner’s draw is a tax-free transfer of money (no taxes will be assessed or paid) from the company to an owner. These wages are not subject to payroll tax filing and deposits, but are instead taxed on the individual level with annual tax returns.
Reminders
If you need to set up or pay an owner in Gusto so they can receive non-taxed owner's draws, click the dropdowns below.
We currently don't have the ability to set up an owner to receive both a taxable salary and a non-taxed owner's draw. If you have an owner who is a W-2 employee, we recommend handling owner's draws outside of Gusto as we do not handle the taxes or filings for these distributions.
Owners who have benefits with Gusto must set up an employee account and classify the employee as an owner so they can participate in the company's benefits package. This setup and classification is required so that the owner can access benefits information and participate in annual open enrollment through their Gusto account.
Once an owner's draw is run, no deduction will appear on the paystub—owner's draws are pretax and the company is paying the full premium.
If an existing employee should have been classified as an owner during an earlier part of a calendar year, check out this article with more information on updating a shareholder's status.
The owner's draw will appear in regular payroll and can be processed with the rest of your employees' payments.
We currently don't have the ability to set up an owner to receive both a taxable salary and a non-taxed owner's draw. If you have an owner who is a W-2 employee, we recommend handling owner's draws outside of your Gusto account as we do not handle the taxes or filings for these distributions.
These wages are not subject to payroll tax withholding, filing or deposits, but are instead taxed on the individual level with annual tax returns.
If you have questions about the personal tax implications of owner's draws (versus payroll tax implications), we recommend reaching out to a licensed tax advisor for guidance.