$84500 is what you paid yourself so show that and that employee contribution doesn't show on the 1120S....only the employer contribution if a qualified plan.

Great Thanks.  I think i get it.  

So in 1120S Line no 7 i.e Compensation of Officers i will be entering $84500 ($65000 + $19500).  I was  getting confused because  in W2 my taxable income is $65,000.

Then looks like the employer SEP IRA contribution i.e  $16250 will go under line no 17 i.e Pension, profit-sharing, etc., plans  .

Can you please confirm my observations?  

Thanks a lot for your help, also if you are a  accounting specialist from turbox tax and can validate my return for the extra $60 i would love buy in.

Can't validate....you got it right now anyway.

On the 1120S you use box five of the W-2 for the officers compensation not box one.  That's where you were getting confused.

Thanks Critter you are correct i believe.  So where will i show employer contribution of $16500 on the W2?

I think you really need local professional assistance to be educated properly ... the employee's contribution from their wages goes in box 12.  The employer's  portion does NOT go on a W-2. 

Yep, I agree.  I have reached out to one.  They are taking time.  Thanks for your help as well.