How to Respond to Turbo Tax's Question Regarding Officer Compensation During e-Filing

Forum|Forum|6 years ago
March 7, 2020
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I have struggled to get my question answered so I am creating a separate thread to clarify. Please read carefully.

I am an LLC who elected SCORP status with the IRS. I am a single member LLC that paid the only >2% owner (ME) via W2. I have filled in my SCORP return using Turbox Tax for business.

During the "e-filing" part of the program I was prompted with the follow question:

"The IRS requires the following information when filing electronically.

Claiming Officer Compensation in this return (Yes/No)

Number of Officers with Compensation (expects a number)

Number of Employee W2s issued for 2019 (expects a number)

No instructions, no reference as to how to fill in, and no idea where this information is saved in the return.

Since I dont have officers I am struggling with whether to say I did or did not have officer compensation. Especially given the fact that W2/%Ownership information already exists elsewhere in the return.

I suspect I need to answer: Yes,1,1 ... but the fact that I dont have Officers is throwing me.

I really need guidance on that question and its relevance to my situation including information on why its being asked at the last minute in the return.

Thank you

TurboTax Business Windows

DianeC958

You are considered for tax purposes an Officer of the Corporation since you are the Managing Member of the LLC.

Since you paid yourself a W-2 wage you would report that one officer received wages and the amount of wages you were paid.

If you have no other employees that you pay, then number of Employees that received a W-2 is zero.

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IamIntractableAuthor

The Turbo Tax prompt does not ask for the amount of wages paid. That's why this question is so out of place and also so under-explained.

You suggest that given my circumstances I respond to the questions:

YES

Correct?

DawnC

Employee

That is correct. You can answer Yes - 1 - 0. For purposes of reporting officer compensation, a managing member is considered an officer of the corporation. They want you to confirm that you did pay yourself a wage on a W-2 as opposed to taking your income in only payroll tax-free distributions.

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gloriah5200

The answers to the following questions are in bold:

The IRS requires the following information when filing electronically.

Claiming Officer Compensation in this return (Yes/No) Yes if reasonable compensation paid on W-2

Number of Officers with Compensation (expects a number) You stated a single member LLC elected to be taxed as an S corporation. You would enter the # of officers stated in the corporation minutes.

Number of Employee W2s issued for 2019 (expects a number) Enter the # of Employee W-2s issued not including the officer compensation

The owners also should be officers of the corporation. Form 1125-E in the 1120S return would report compensation paid to officers.

An s corporation must have officers.

When you elected to be taxed as an s corporation you take on all characteristics of the s corporation, not just the ones you want.

In order to deduct the wages you paid yourself on the 1120S, you would enter those amounts reported on Form W-2 as officer compensation.

Yes, taking "cash and/or property distributions" without receiving reasonable compensation reported on Form W-2 would be quickly reclassified by IRS as compensation subject to employment taxes and assess you to late filing and late paying payroll taxes, which carry some heavy penalties.