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Partner wages paid on W-2

mhkdgal
Level 3

An LLC with two members files taxes as a partnership.   We are just now preparing and filing 2016 tax returns and have discovered the two members paid themselves W-2 wages in 2016.  I know this is incorrect and these amounts should have been categorized as guaranteed payments.    I am curious how others would recommend correcting this at this point.   I am thinking we should file amended W-2s, but since it is from 2016, can we just report the amounts as guaranteed payments on the 1065 (including the 1/2 of the FICA taxes paid by the LLC).   

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sjrcpa
Level 15

I wouldn't do Guaranteed Payments because on their 1040 they'd need to report the GPs and the W-2s.

Yes this is wrong. I'd prepare the return with the info given. On the 1065 deduct the wages. CAGMC.

You probably have this for 2017-2020, too?

Advise them of the error of their ways and have them stop.


ex-AllStar

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sjrcpa
Level 15

I wouldn't do Guaranteed Payments because on their 1040 they'd need to report the GPs and the W-2s.

Yes this is wrong. I'd prepare the return with the info given. On the 1065 deduct the wages. CAGMC.

You probably have this for 2017-2020, too?

Advise them of the error of their ways and have them stop.


ex-AllStar

View solution in original post

mhkdgal
Level 3

Thanks for your reply. Yep, they took w-2 salaries in 2017 through 2019 also.  They didn't in 2020 due to lack of funds and covid shutdown.  Thanks for your input on how to handle this.  What does CAGMC in your reply stand for?    

 

Thank you!

 

IRonMaN
Level 15

Come And Get Me Coppers.

And I also would go the wrong way route and file as is.  No use kicking a dead horse.

ACME Taxes, Tattoos, Tires and Tasmanian Devils - one free devil with every return.
abctax55
Level 15

@mhkdgal 

CAGMC was one of the favorite says of our dear departed friend on this forum:

Chuck aka Archie.  Those of us that knew him still miss him; I can't see a Mazda Miata without thinking of him. 

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


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IRonMaN
Level 15

Yeah, those Miata's do the same thing to me.

ACME Taxes, Tattoos, Tires and Tasmanian Devils - one free devil with every return.
JJK
Level 3

Were all these W2 payments relating to their ownership?   If yes, I agreed with all above. (GP)   

If these W2 payments were relating to their job function, partners CAN have salary reporting on W2. 

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IRonMaN
Level 15

Are you really sure about that one?

ACME Taxes, Tattoos, Tires and Tasmanian Devils - one free devil with every return.
abctax55
Level 15

Yeah, @JJK  - got any backup or a cite for your position?

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


If a post answers your question, click on *Accept as solution* for future searches
qbteachmt
Level 15

@JJK 

Just to be clear, this is wrong for a partnership filing as a partnership: "If these W2 payments were relating to their job function, partners CAN have salary reporting on W2"

I'd hate for someone to find this comment and believe it.

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