Which line in Form 1040 should I fill the Officers Compensation I have paid for myself (100 % ownership) from the S Corporation I own? Is it necessary to issue a W-2?

[IsabellaG · Accepted solution]

Yes, if you are an Officer in an S Corporation, your compensation needs to be reported on a W-2.

https://www.irs.gov/uac/Wage-Compensation-for-S-Corporation-Officers

[kathir2410]

Thanks for the clarification

[mbmsbea]

can you show sample

[Critter-3]

Your corporation needs to file a W-2/W-3 at the end of the year plus the annual 940 form  AND quarterly form 941s and any state forms needed.   If you have not been doing this then seek local professional guidance to get the late forms completed correctly.  

Once you have completed the corporate form correctly reporting the officer wages and the company paid taxes then anything left over will be reported on the K-1 form.  On the personal return you will enter the W-2 and the K-1 form that are issued to you.  

[marcisikoff]

This is totally new to me as a tax preparer. Pass-thru entities use K-1s.

S-Corp only does 1125-E if gross receipts of $500k; I don't have any clients in that range so I have never HAD to furnish an 1125-E to the IRS.

However, the general guidance is to have officer compensation (if they are owner(s) of the S-Corp) to be reported on Schedule E, Supplemental Income.

That said, K-1 from an 1120S does not have "guaranteed payments" like a partnership's K-1. I typically let the $$ from the compensation flow to Schedule C since that auto generates the self-employment figures.

Obviously, it would be much, much easier if K-1s were standardized across entities,

[Mike9241]

regardless of size officers/shareholders involved in the operation of an S-Corp are supposed to take a reasonable salary. this requires registering with the iRS (and maybe also state) for filing quarterly payroll tax returns 941s and any state unemployment compensation returns then an annual 940, W-2s,,W-3s. 

Distributions are not compensation but a return to the owners of profits after expenses including wages to officer/;/shareholders been paid.  if you have not filed or registered for these returns run to a tax professional. there can be substantial penalties for failure to file and withhold required taxes. 

issuing a 1099 for compensation is not adequate since employees do not get 1099 but w-2s