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?

[dmertz · Accepted solution]

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).

[pk]

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