Payments to Employees for Services

You can generally deduct the pay you give your employees for the services they perform for your business.

Note that while an LLC taxed as a partnership may deduct certain guaranteed payments to members of the LLC as salary expenses, those payments are not treated the same as salaries paid to employees. There is no withholding on payments to partners, there is no W-2 and the amounts are reported as income to the member (partner) on his or her Schedule K-1.