Tax Year Prior to 2020: How report officer's compensation?

[j-samuel-baker]

I own an LLC. It's registered with the IRS as an S-Corp elect. I am the only employee. I pay myself a salary by paycheck with payroll deductions etc. using Intuit online payroll. I also take a cash draw. I understand my draw is considered officer's compensation and is considered wages. Where on my personal tax return do I input the draw amount? I produced a Schedule K and input that into my personal tax return and the Schedule K shows the draw amount. But I don't see a place to input the draw amount in Turbotax to record as income/wages. Thanks

[WillK]

You would report the wages you pay yourself on the W-2 under the officer wages information. As for the draws, they are considered compensation, but not in the way you are thinking about it. The draws that you have taken from the company should be reported on the K-1, which when you report the K-2 on your personal return the draw will be reported. 

You should be using at least Turbo Tax Premier to report the K-1. To report your K-1:

1. Log in to your account

2. Click on continue my taxes

3. On the left-hand side is the menu bar, click tax tools

4. Click tools

5. Click Topic Search

6. Enter in 1099-MISC

7. Click go

[ericinmaryland]

@WillK Your answer does not address how to respond to the prompt that appears during e-filing asking for:

claiming officer compensation

There are no instructions and there is enough information in the return (2019) for TT to figure this out. However,

as the original poster indicated. I too paid myself a salary and then distributed the remaining profit over the year as needed. Since this is a passthrough, leaving the money in the business account or taking it out makes no difference. I pay tax on it as the sole owner/employee.

SO I suspect the prompt during e-filing is about being sure I took w2 compensation. The wording on the page is  terrible.

Please provide clear guidance. Is any of this money "Officer Compensation" in this scenario?

I believe the answer is no.

[WKins2]

When TurboTax asks about officer compensation they are really asking about the salary wages reported on W-2. Sorry the above answer provided is not clear, and there is a typo in it.

The money that was "left" in the business account, or distributions taken during the year is not considered officer compensation. Hope that helps. 

[ericinmaryland]

So, an LLC electing Scorp Tax status who pays the Managing Member a salary an the distribute the remaining profit to that managing member would indicate:

1) No Officer compenation

2) 1 W2

?

[DavidD66]

In this situation, the officer compensation would be the amount on the W-2.  The "draws" are distributions to owners and should appear in box 16-D of Form K-1.

[ericinmaryland]

To which form in the return is this information added?

[DavidD66]

Officer and Shareholder compensation is added by going to:

• Federal Taxes
• Deductions
• Compensation and Benefits
• Salaries and Wages

The first screen after clicking on Salaries and Wages is the entry screen for Officers and Shareholders.

Distributions to the Shareholder are entered in the "Shareholder Information" section.  Click on Shareholder Information, and you will be asked "Did [shareholder] take money or property out of the corporation during the tax year other than salaries or loans?"  Answer "Yes" and click Continue.  On the next screen you will enter Distributions to Shareholders.

[ericinmaryland]

This does not really answer the question that I asked. During the filing step you are prompted about compensation for officers. I want to know where the response to that question is placed on a form. Following your comment above there should be no question during filing step about officer compensation yet there is so I would like to know where that information goes on the return. 

To be clear, I already entered in the salary for the managing member in the area that you indicated. I’m asking about the question about officer compensation that appears during the filing step because it makes no sense that they would be a question there nor does it make any sense about what should be filled in Normas there any indication about where that information goes on the return

[DawnC]

Officer compensation goes on Line 7 whereas Salary and Wages go on Line 8 of your Form 1120-S.   Please see this discussion regarding a similar inquiry.  @ericinmaryland