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1120S/W2 accounting for 401(k) if sole owner of S-corporation participates and receives match.

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Level 2

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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Level 15

You figured correctly to use the $50,000.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

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Level 15

You figured correctly to use the $50,000.

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

View solution in original post

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Level 2
So you're saying to use the $50,000 on line 8?
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Level 15

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.

Former Chump... umm.... AllStar.
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