I am a Sole Proprietor of an LLC who mistakenly paid myself as an employee via an online payroll. Should I enter the W2? Or can I reverse those payments & amend the W2?

[patrick2]

I am a Sole Proprietor of an LLC who mistakenly paid myself as an employee via an online payroll for Q1 & Q2 of 2016. I have stopped paying myself via payroll.

I have another employee, so I had to generate W2 for the business, which includes myself.

Should I enter my W2 from my business in TT?

Or can I reverse/reclassify those payments & amend the W2 to remove my name?

[RichardK · Accepted solution]

You must amend your Payroll Tax Returns to reverse your payroll. You are not allowed to deduct wages you pay yourself.

[brad2]

How would I reverse the payroll?  Would it be for the net amount, or gross amount?  What would the journal entry look like?

[mcsmith]

This is not true. There is another choice you may consider. If this is your first year, or if you have never done what I'm about to describe before, you can elect to file as a corporation and proceed using the decisions you've already made. This is a great choice if you are a low-income, low-profit industry, or if are bootstrapping and have lots of expenses and losses. The forms you need to file federally are 8832 to elect to file as a corporation, then the corporate income tax (21% net) using form 1120. Easy!

[melanie1]

mcsmith - your info has helped me tremendously. I started my LLC in 2018 but made no federal election to be treated as an S-Corp. I mistakenly added myself to company payroll and now I am trying to correct my errors. There is an option on the 8832 form to request 'late classification relief'. Because I missed the 75-day deadline to file this form, I am requesting the forgiveness. Because I have been submitting state and federal payroll taxes on myself, I am claiming that I have demonstrated the intention to be treated as an S-Corp, but due to a misunderstanding, did not realize the required 8832 filing.

[MAGreen]

Use IRS Form 2553 to elect S Corp status!

[MAGreen]

Use Form 2553 to elect S Corp status!