The IRS says -
"Line 37 Cost of Labor
Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. Small merchandisers (wholesalers, retailers, etc.) usually do not have labor costs that can properly be charged to cost of goods sold. In a manufacturing business, labor costs properly allocable to the cost of goods sold include both the direct and indirect labor used in fabricating the raw material into a finished, saleable product.
Direct labor. Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. They also include a part of the wages you pay to employees who work directly on the product part time if you can determine that part of their wages.
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Indirect labor. Indirect labor costs are the wages you pay to employees who perform a general factory function that does not have any immediate or direct connection with making the saleable product, but that is a necessary part of the manufacturing process.
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Other labor. Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. Generally, the only kinds of labor costs properly chargeable to your cost of goods sold are the direct or indirect labor costs and certain other costs treated as overhead expenses properly charged to the manufacturing process, as discussed later under Line 39 Other Costs."
So note that if you are not in manufacturing or mining, you probably wouldn't include the wages in cost of goods sold anyway.
If you choose to put the wages all into the regular (non-COG) expenses, then do the following:
In the TurboTax software, you will be asked a question under Business Income and Expenses->Business Profile of your sole proprietorship business, "Pay Any Employees?" Answer "Yes", and then continue.
Navigate to Business->Business and Expenses and arrive at the screen entitled "Let's write off some business expenses".Under Expenses, navigate to "Employee expenses" and enter the WAGES only here.
On Schedule C on the 1040, wages paid to employees of your self-employed business are deducted on line 26.
The employee's FICA is entered under "Taxes and Licenses" on the same screen entitled "Let's write off some business expenses".
The employee's FICA is entered on line 23 of Schedule C.
