How to Respond to Turbo Tax's Question Regarding Officer Compensation During e-Filing

[KathrynG3]

1. "Enter the # of Employee W-2s issued not including the officer compensation" the third question would be answered with a zero if the owner/officer is the ONLY person receiving W2 compensation? Yes, correct.

2. Does this mean compensation from W2 forms or are they specifically looking for compensation OTHER than W2? It means compensation from Form W-2.

3. Number of officers with compensation? If you claim YES on Q1, this line requires a numerical response. Again, does this mean compensation from W2 forms or are they specifically looking for compensation OTHER than W2? 

It means compensation claimed and taxed as wages on Form W-2. 

4. Number of employee W2's issued? Does this include the W2 for the owner/officers or only employees OTHER than owner/officers?

This regard only employees OTHER than owner/officers.

@musicmafia

Even if an LLC elects to be taxed as an S-Corp, the owner is the owner.

@Critter-3 is correct. For more information, see: 2020 Instructions for Form 1120-S, page 16.

@beyondthebox

[alex14]

What are the consequences of being confused on this screen and providing the incorrect information? Because this is apparently only collected for electronic filing I assumed that it was used in some way to cross reference with Social Security on W2s or something and that returns would be rejected if it didn't match. In my case the 1120s I filed was accepted. Should I be worried about this down the road? The return itself is fine. Thanks! 

[RobertB4444]

@alex14  There may be issues and there may not be.  If you receive a letter from the IRS asking for clarification of the information that you entered on your return just answer promptly with a return letter.  Should be fine.  Mistakes happen and none of these answers will result in money you owe to the IRS.

[musicmafia]

I disagree that mistakes are no big deal. Speaking from personal experience, if you miss (or don't receive) IRS correspondence regarding a simple mistake, and that mistake is not addresses, a small mistake can turn into a big deal. 

Experts should be providing solutions and these issues should be addresses by TT Business, so the interviews can be made clearer.

In the case of this issue, NOTHING has been changed on the TT Business program to address the confusion on this e-file screen.

[musicmafia]

I am NOT an expert, but after dealing with this issue since last year, here is my understanding of the questions in simple terms:

“Claiming officer compensation” refers to owners/officers receiving compensation from W-2.

“Number of officers with compensation” refers to the number of owners/officers receiving compensation on W-2. (If you claim YES on “claiming officer compensation,” this line requires a numerical response).

"Number of Employee W-2s issued” pertains to “employees” who are NOT owners/officers. If the owners/officers are the ONLY person(s) receiving W-2 compensation, and there are no other employees receiving W-2 compensation, this would be ZERO. If there are employees (other than owner/officers) receiving W-2 forms, the number of those employees would be listed here.

Again, I am NOT an expert and I can not guarantee this is accurate, but after a year of conflicting responses, this is what I think is correct. 

[JulieS]

Yes, your understanding is correct. 

[musicmafia]

Thanks Julie. 

PS Would 1099 or K-1 compensation have any bearing on the answers, or is this solely regarding W-2 compensation (which I assume it is)?

[JulieS]

Yes, these questions are based solely on W-2 compensation.

[musicmafia]

Thanks for confirming that! 😎

[trrammy1]

This is helpful.

If you are the owner and pay yourself compensation, then officer comp is yes. If you had employees, then employee comp is yes, else no.

[IHaveABigQuestion]

Julie since you are an employee of TurboTax can you please escalate this page to be fixed so it can be understood better? People have been asking about this page for years now, can't they just clean up the wording so we understand it better? I still feel unsettled about putting 0 where it says Number of Employee W2s issued, since I DID issue a W2 to myself as the only owner/officer/employee. @dmertz can you weigh in (since you always have great and thorough responses). Or can anyone? When we answer these questions where exactly is it being reported? The 1120s already has line 7 filled out for Officer Compensation and line 8 is blank. So why would they need to ask these 3 questions right before filing after all our forms have been printed? Is it actually going anywhere where our answers need to match exactly to not trigger an error with the IRS?

[RobertB4444]

These answers should match the return.  It's a key for the IRS to make sure nothing weird is going on.  In your case - in order to match the return - you are NOT an employee.  You're an officer.  So the answers are Yes, 1, 0.  

You have the simplest version of this question.  If you had an entry for wages and salaries on the return it wouldn't say how many people had been paid in that number - it would just be an amount.  You would need to make certain that in addition to knowing the correct number of officers you also knew the correct number of employees.  

@IHaveABigQuestion 

[musicmafia]

“Claiming officer compensation” refers to owners/officers receiving compensation from W-2.

This thread already contains the confirmed answer:

“Number of officers with compensation” refers to the number of owners/officers receiving compensation on W-2. (If you claim YES on “claiming officer compensation,” this line requires a numerical response).

"Number of Employee W-2s issued” pertains to “employees” who are NOT owners/officers. If the owners/officers are the ONLY person(s) receiving W-2 compensation, and there are no other employees receiving W-2 compensation, this would be ZERO. If there are employees (other than owner/officers) receiving W-2 forms, the number of those employees would be listed here.