@pencil123 wrote:
Thanks a lot for your detailed response, @Mike9241! Really appreciate it. We'll definitely get help from an accountant. You mentioned that we may need to get our "state Unemployment Compensation returns" fixed. Is that for people who collected unemployment benefits in 2020?
Mike's answer may be incorrect. What do you have for box 3 and 5?
401k contributions are only subtracted from box 1 wages subject to income tax. Your wages are still subject to social security and medicare tax because they are still earned income. (For example, if my gross salary is $50,000 and I contribute $26,000 to a 401(k), my box 1 wages would be $24,000 but my box 3 and box 5 wages would be $50,000.)
Having box 1 zero is not necessarily wrong, even for the owner of an S-corp, as long as you have earned income in box 3 and box 5 and your earned income is fair compensation for the work you performed.
I want to refer this to other experts @rjs @Hal_Al @dmertz
