Tax Year Prior to 2020: As a S Corp owner, I paid W2 wages to myself. When doing my corp federal tax returns, Do I enter such wages in "officer's compensation" or should I include my wages in "employee salary"?

[arvandbiz]

I have a S corp and paid myself W2 wages. When filling out my Corp Fed tax returns, I wonder if the amount should go in "officers compensation" or should I include it in "employee salary"?

[GeoffreyG]

Dear arvandbiz:

As a TurboTax Business agent, I'd be happy to answer that question for you.

Strictly speaking, if you are a significant owner (or the sole owner) of an S-Corporation, and you actively perform services for it, then you would enter your W-2 wages as "Officers Compensation," rather than "Employees Salary."

Practically speaking, it really doesn't matter which one of these categories you choose.  Please allow me to show you why.  In order to do that, first download and open up a blank Form 1120-S here:

http://www.irs.gov/pub/irs-pdf/f1120s.pdf

As you'll instantly see from looking at Lines 7 and 8, both types of W-2 compensation get deducted from the S-Corp's taxable "flow through" income in the same way.  The only filing difference, in fact, other than the line number, is that when the S-Corporation's gross receipts exceeds $500,000 in total, then Form 1125-E must be completed as well (and that form is included with TurboTax, by the way, for use if necessary).

Thus, you may enter your W-2 wages however, you like, in either place -- although Officers Compensation is probably technically correct in your case.

Thanks for asking this question, and good luck to you!

Regards

[rhondab_5748]

Where do C corporation officers who are compensated (as detailed in a 1120 form, line 12 or 13) report their income?

[GeoffreyG]

Dear rhondab_5748:

Thanks for asking your very much related question about compensation of officers in a traditional C-Corporation.

Your answer is that the reporting process is substantially the same on an 1120 as on an 1120-S; so the above advice applies to you as well.  If your corporation has receipts in excess of $500,000, and you report Officers Compensation, then you'll use Form 1125-E too (just like an S-Corp).  That tax form, again, is included with the C-Corp tax package as part of the TurboTax Business product.

For your reassurance that you've done it (reporting compensation) correctly, you may wish to take a few minutes and look at the actual IRS instructions for Lines 12 and 13 on Form 1120, which can be viewed on Pages 11 and 12 of the official instruction booklet here:

http://www.irs.gov/pub/irs-pdf/i1120.pdf

Thanks again, and good luck to you!

Regards

[greenewrench]

This answered my question.  However, since I moved the officer portion of wages to the officer section, and adjusted the all other employees to reflect the balance, the total is now wrong.  It keeps reverting the total back into all other employees and now adds the officer amount to it and won't let me remove it.  I have tried the back button to try and undo what I input, but it seems no matter how far I go back, it keeps the information.  Please help!

[hkbirmele]

My situation is related... but I don't even know where to start.. I am sole owner of an S-Corp and issued a 4Q 941 for my wages and included withholding. However, on my 1120S my wages are listed as  Compensation to Officers. Now the IRS says I have credit for the withholding taxes amount because my 1120S doesn't show any wages... because my wages are under Officers Compensation. Not sure how to proceed. They are asking if I want a refund, but I'm not sure I'm entitled to it. I don't want to submit a 941-X showing no wages, (even though I never really paid myself) because I included the withheld taxes on my personal 1040. Help! Not sure how to proceed.

[Critter]

Did you also issue the W2 & file the W3 ?

[pk]

Having read through all of the above interaction, would like to point out-- >  (a) directors of the corp ( S or  otherwise )  receive compensation that is not dictated by the IRS  but generally is controlled by the  board ;  (b) this compensation  is usually   reported on 1099-misc  or similar depending on the kind of remuneration -- in kind  or in cash, there may also be benefits such as health coverage -- but fundamentally it is  not re-portable on W-2 and no withholding ; (c) employee wages  are constrained by  "generally prevailing  wages for similar job " and  IRS dictates that;  (d) there is withholding and all the labor laws of the state come into force .

So @arvandbiz  , while as a one owner small corp, it is possible that you are both the employee brining in the  income for the corp and the director  making the long term decisions,  you still need to decide which is  your main role  ( generally the employee ) and  pay yourself  "prevailing wages" and then decide whether you should also draw something as a director  (1099-MISC ) , in addition to a share holder ( K-1). 

Very strongly suggest that at least for the first year , you employ the services of a tax professional ( so the books are set up properly ) and then you can do by yourself.  Errors here can cost you a lot down stream.

Good Luck

[Jerbark]

I have a similar, but different issue:

I paid myself $800 in wages and I put that the officer comp box, but TT is showing over $5,000 in wages??? I can NOT figure out where that number is coming from - can you help?

Also, in the "forms" sections, I used to be able to click on the actual form and see the ACTUAL form, going to the IRS, but now, all I see are "worksheets"...what am I missing?

[seant1976]

If I am the owner of an S corp and pay myself a salary, can I still put the compensation under compensation of officers even though the total is under $500k?  Is the 1125-e only required above $500,000 but it's still okay to put my comp in that field if it's under that amount?  Also, would I need to W-2 myself?  I had a tax preparer do my taxes last year and he put my compensation under Cost of Goods Sold (1125-A) under cost of Labor?  I am a hair salon owner.  My business income is derived from doing hair services as well as collecting booth rent income.  I then pay myself a set amount each month.  

[WKins2]

You would file your income under officer wages since is it under 125k. You will need to run payroll for yourself and pay yourself a reasonable salary. You will need to file and pay in payroll taxes, and then send yourself a W-2 at the end of the year.

The best thing to do is to contact a payroll company to assist you in the payroll aspect (running, filing returns, etc). 

[tracker]

Do yourself a favor and get a CPA who specializes in your industry to do your taxes. There are tons of rules for S-corps and one of those rules is officer compensation. The IRS requires that you pay yourself a reasonable wage and if you don't put that amount in the officer compensation you could wind up getting audited. There's a ton of other things that can get you audited too.

And while you're at it, a good bookkeeper is worth their weight in gold.

[ritabp]

do i put gross salary for the officer or net pay?

[Critter-3]

Gross pay. 

[Anonymous]

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