Need Expert Clarification on TT Business Question Regarding Officer Compensation During e-Filing

[musicmafia]

Although others have asked about this in this forum, a number of experts have replied with completely contradicting answers. As such, confusion still exists on this topic. If you know the correct answer, PLEASE offer a complete explanation.

When you go to e-file an S-Corp return in TT Business, the program asks three questions that could be interpreted any number of ways. There is no help in the program. The questions are:

1. Claiming officer compensation? Y or N. Does this mean compensation from W2 forms or are they specifically looking for compensation OTHER than W2?

2. 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?

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

SCENARIO: If you are the sole owner/officer of the S-Corp and you pay yourself a W2 and take no other money or compensation out of the business, what should your answers be to these questions and WHY?

Corp returns are due today and I am stuck unable to file because of this confusion. We really need clarification about this as there is no help in the program.  Thanks!

[musicmafia]

SAMPLE SCREEN

[musicmafia]

Went to online support in my account, chose the TT BUSINESS software in the dropdown box and was given a number for business support. Called the number, there was no option to receive a call back (as in previous years) so I was forced to wait on hold for over an hour listening to the same elevator song loop. Finally got through to a rep who was absolutely clueless, yet kept me on the phone for 45 more minutes. He finally admitted he knew nothing about the TT BUSINESS software, did not have a copy of it for reference and was not aware of a department that provided support for TT Business. 

I asked if he could escalate me to a level 2 tech or supervisor or someone who might be able to help. He chatted with a supervisor who told him to tell me to call ANOTHER 800 number supposedly for the TT Business department to help me. Two hours wasted. I hang up, dial the number and the number is for Quickbooks, which I do not use. 

Now I'm back to the original 800 number (estimated wait 1 hour) hoping for a more knowledgeable CSR. This is so unnecessary and frustrating. These questions in the TTB program should be written differently or explained. 

[musicmafia]

Well, it's that time of year again, so I bumping this since the issue is still unclear.

[LudwigVan_fan]

I'll give this a shot.

1.  Officer compensation...Compensation paid to officers should be on W-2.  If it's compensation, why wouldn't it be on W-2?   Distributions to officer/shareholders that are treated as distributions on Sch K would not be entered here and are not treated as "compensation".   So, officer compensation would be included on W-2.  In the past, and perhaps currently, there existed a large audit issue regarding S Corps and Officer compensation.  Small S Corps would often times NOT pay officers compensation, but included everything in Sch K & Sch K-1.  Issue was/is that officers are statutory employees.  As such, if they perform any work for the S Corp, they should be compensated for that work.  The issue was the avoidance of SS & Medicare taxes on payroll.

2.  I would say yes, this the number of officers that received a W-2.  As state above, what could be compensation from the S Corp to the officer that wouldn't be on W-2?  If by chance there is some sort of "compensation" from the S Corp to the officer and not on a W2, it should be here.  But I would think "claiming officer compensation" in #1 would go along with #2, officers getting the compensation.

3.  Number of employee W2s...include officer and employee W2s issued...total.

[JulieS]

Officer compensation is based on W-2 wages for these questions.

1. If you have one or more officers receiving a W-2, answer Yes.

2. List the number of officers who receive a W-2.

3. List the number of W-2 forms issued to employees who are not officers.

For your scenario:

1. Yes

2. 1

3. 0

As to the why, it is part of the Modernized E-file (MeF) Schema guidelines for e-file. These three questions are in every US tax software program. 

[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 in various threads, this is what I think is correct.