Question

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"?

Forum|Forum|6 years ago
June 7, 2019
3 replies
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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"?

TurboTax Business Windows

G

GeoffreyG

Employee

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

R

rhondab_5748

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

G

GeoffreyG

Employee

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

G

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!

T

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.