I have a client who paid herself a reasonable salary with 401k. The business had gross receipts lower than $500k. I manually entered the salary on line 7 of 1120S without completing the 1125-E.

However, I am wondering, do I enter the gross amount including the 401k?

I ask, because when I look at the W-2, in box 1 it does not have 401k added to the gross salary, but does in the other boxes. I haven't seen the 401k treatment for an S-Corp before so wanted to make sure I was completing this correctly.

I'm thinking it is because the 401k offers a tax benefit, but shouldn't the compensation to officers match box 1 on the W-2? Or will it not match box 1 because of the tax benefit?