Hi RaifH.
I hope you can help me with this tax question….? I am LLC SCorp
2021, I (employer) contributed $26000 (with catch up) to my self directed 401K from my business checking account directly to Fidelity. I coded this in QB as Self Directed 401K contribution EXPENSE
So, on 1120S, I apply this $26,000 amount on line 8 (salaries and wages). Why line 8 instead of line 17 or 18? Because according to the 1120S instructions on Line 17 (second paragraph), it stated “If the corporation contributes to an individual retirement arrangement (IRA) for employees, include the contribution in salaries and wages on page 1, line 8, or 1125-A, line 3, and not on line 17.
I thought I ask this question to see if you would agree. If I, the employer, contributed $26,000 to my self directed 401K, it should be treated as an expense. To record the expense on 1120S, then it should be on Line 8, salaries and wages. Agree or disagree? Obviously, the purpose of expensing the $26,000 is to lower my tax basis. OR, do you believe this $26,000 amount should be from my owners withdrawal? Your answer will directly impact my P&L.
In addition to doing the manual 1120S form, I also bought the 2021 TurboTax Business edition that can do 1120S. The instruction is very vague as to how to handle this $26,000 employer contribution using company's fund.
Assuming you agree that it cab be expensed, my next question is how to code this $26,000 on W2 form? Would it be $26,000 on line 14, OTHER and check off “Retirement Plan” in Box 13? If not, how would you record $26,000 for my self directed 401K? I inadvertently omitted this $26,000 at the time I filed my W2 and W3 last month. I will have to amend accordingly.
This is my first year doing SCorp for 2021. This $26,000 contribution is o help lower my tax basis. I’m learning day by day doing taxes while also running my biz. HELP! TIA!
