In a C Corp, sole owner and sole employee with one owner 401k, will I or the Corp have to pay any employee/employer tax on the 25% profit share?

Forum|Forum|7 years ago
June 6, 2019
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Best answer by dmertz

The amount that is the profit sharing contribution to the employee's 401(k) appears as a deduction on the C corp's tax return (line 23 of Form 1120) and, therefore, reduces the C corp's taxable income. The profit sharing contribution is not reported anywhere on the employee's W-2 or tax return.

The money will be taxable to the employee when later distributed from the 401(k) and the distribution is reported on a Form 1099-R, the same as any distribution from the 401(k).

dmertzAnswer

Level 15

The money will be taxable to the employee when later distributed from the 401(k) and the distribution is reported on a Form 1099-R, the same as any distribution from the 401(k).

pk_

Level 15

The only thing I see here is that a C-Corp has a profit $X and chooses to declare a profit share ( not return of capital to the owner ) $Y. The entity will taxed on its profits ( retained/ re-invested or otherwise with some provisos ) and the recipient of the profit share would be taxes at the individual level