Thank you. It makes more sense now, but I want to make sure I get the W2 and K1 correct.
You stated the following: "The net of this timing difference will be more net income (income less wages) for the LLC in the current tax year. Next year, you'll have more wages and less net income."
It seems to me that you are saying my 2024 W2 wages are based on the first 12 payments, but my 2024 K1 distributions are based on the total 13 payments, right? Hypothetically, let's say the S-Corp received $10,000 per month, or $120,000 for the first 12 payments in 2024, but with the 13th payment, the total comes to $130,000; thus, the 1099-NEC indicates $130,000. Of the $10k/mo received, let’s say W2 wages are $6000/mo, and K1 distributions are $4000/mo.
For 2024 TurboTax business, I believe the following entries would be made:
* 2024 Sales and services receipts = $130,000 (13 x $10,000/mo)
* 2024 Salaries and wages paid = $72,000 (12 x $6000/mo)
* 2024 Total dividend distribution = $52,000 (13 x $4000/mo)
And so the sum of W2 wages $72k + K1 distribution $52k add up to $124,000, or $6000 less than the 2024 total income of $130,000.
If the total payments received in 2025 come to $120,000, then for 2025 TurboTax business, would the following entries be correct:
* 2025 Sales and services receipts = $120,000 (12 x $10,000/mo)
* 2025 Salaries and wages paid = $78,000 (12 x $6000/mo + $6000 from 2024)
* 2025 Total dividend distribution = $48,000 (12 x $4000/mo)
And so the sum of W2 wages $78k + K1 distribution $48k add up to $126,000, or $6000 more than the 2025 total income of $120,000.
