A sole owner of a S corporation has a 401(k). The salary he gives himself is $50,000. He defers $18,000. As such, his W2 taxable wages is $32,000. However, he also matches himself 25% of his W2 of $12,500.
On the 1120S, on line 8, do you put compensation as $50,000? Or, do you put the net taxable amount of $32,000? I figured you put $50,000, because a shareholder of a S-corporation shouldn't have higher or lower net business income based on if an employee deferred in a 401(k). Meaning, if the employee was non-related, and the employee put into the 401(k), the owner of the corporation would be disadvantaged tax-wise (through higher business income) if line 8 reflected $32,000.
The $12,500 is reflected on line 17.
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Yes, the $ 50K is the salary. The deferred amount ($18) is a payroll liability, until it is paid. This is NO different than FIT/SIT etc withheld from an employee's paycheck.
I would have thought that all of this would have already been booked on the trial balance; otherwise you'd have a tough time balancing the return.
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