The amount that is the profit sharing contribution to the employee's 401(k) appears as a deduction on the C corp's tax return (line 23 of Form 1120) and, therefore, reduces the C corp's taxable income. The profit sharing contribution is not reported anywhere on the employee's W-2 or tax return.
The money will be taxable to the employee when later distributed from the 401(k) and the distribution is reported on a Form 1099-R, the same as any distribution from the 401(k).
