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Discussion:Officers salary on W-2, but not actually paid by year end...

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Discussion Forum Index --> Basic Tax Questions --> Officers salary on W-2, but not actually paid by year end...


Discussion Forum Index --> Tax Questions --> Officers salary on W-2, but not actually paid by year end...

Craigums (talk|edits) said:

21 February 2014
The title pretty much sums it up. Somehow the client's (s-corp) payroll service managed to count a payroll as 12/31/13 and include the amount on the W-2 for 2013, when in actuality the funds for direct deposit weren't even taken from the company's account until Jan. 2, 2014.

I'm guessing our only option is to file a amended W2/W3 and Q4 941? What would you do?

(What else could we do? I'm tired and probably over-thinking this.)

Thanks!

Craigums

Ckenefick (talk|edits) said:

21 February 2014
...and amended state withholding/SUTA reports...

Is this a C, or an S, and are there a slew of employees?

Craigums (talk|edits) said:

21 February 2014
It's an S. The only two employees are the two shareholders...

Nilodop (talk|edits) said:

21 February 2014
Can you 'construct' a scenario in which it all would be reported in 2013? Is that a result they'd like?

Ckenefick (talk|edits) said:

21 February 2014
If this is largely a wash (i.e. corp deduction matches 1040 wage inclusion), then I say, "no harm, no foul." In other words, if booking it in '13 or not booking it in '13 produces the same results, then book it in '13 and treat it as Outstanding on the bank rec...just so you don't have to mess w/ amended reports.

Now, if you feel like booking the employer share of payroll taxes and the Service Fee in '13 will throw things unfairly out of balance (i.e. a pure deduction that doesn't wash with any income inclusion, so gov't is harmed), you could always book these few things on 1/2/14, but the actual payroll could stay booked in '13.

It might even be that the payroll service ran the payroll, paid the employees (via direct deposit on 12/31), but didn't withdraw it from the client's account until a day or so thereafter, in 2014. In which case, everything is actually valid.

Nilodop (talk|edits) said:

21 February 2014
It might even be that the payroll service ran the payroll, paid the employees (via direct deposit on 12/31), but didn't withdraw it from the client's account until a day or so thereafter, in 2014. I had no idea that ever happens!

Ckenefick (talk|edits) said:

21 February 2014
...just throwing out possibilities.

Tax Writer (talk|edits) said:

21 February 2014
Nothing. I agree with Chris. Banks can delay processing of things at the end of the year. Was the payment initiated? Isn't there a "mailbox" rule for this type of thing? If I initiate a billpay today, but my bank drags it's feet and doesn't process until March 1st, I'm still going to count it for this month.

DvilleCPA (talk|edits) said:

21 February 2014
I think you are overthinking this. Its merely an outstand "check" at year end.

Ckenefick (talk|edits) said:

21 February 2014
If the payroll service merely recorded a payroll, but did nothing else prior to year-end, not sure how we'd have a legitimate outstanding "check."

These payroll services bring up agency issues...had one just earlier in the week. If the payroll service is a mere agent, which it might be, even transferring money to it could be viewed as a big nothing - moving money from one bank account to another.

JR1 (talk|edits) said:

February 21, 2014
There's a problem?

Craigums (talk|edits) said:

21 February 2014
JR, that's what I'm wondering...

They definitely didn't get paid until after year end...Even though there's technically "no harm no foul" we all know that that doesn't necessarily mean that it would all be A-OK if it were ever examined.

That said, it seems to be a whole lot of work in order to not really do much.

JR1 (talk|edits) said:

February 21, 2014
Craig, what I was trying to say is that there is no problem. Find something else to do. The payroll got turned in, processed, didn't clear due to holidays. No one cares.

Ckenefick (talk|edits) said:

21 February 2014
Even though there's technically "no harm no foul" we all know that that doesn't necessarily mean that it would all be A-OK if it were ever examined.

Why? We have an S-corp, a pass-thru entity. IRS disallows the wage deduction on the 1120S, then we remove the wages from the 1040. No harm, no foul. As I said above, the only place this might harm the government is if you're deducting the employer share of the payroll taxes in the current (and/or if we're dealing with a retirement plan contribution).

Nilodop (talk|edits) said:

21 February 2014
Can you 'construct' a scenario in which it all would be reported in 2013?

This question is weird. If the shareholder/employees tried to delay the receipt, it would be subject to treatment as constructively received. Here, they did everything to receive it in 2013. Not exactly your typical constructive-receipt scenario, but...

Tax Writer (talk|edits) said:

21 February 2014
Craig, what I was trying to say is that there is no problem.

I agree with JR1. I don't see that there's any problem here-- the taxpayer initiated the payment in good faith, and any delays were caused by the bank/ payroll company. But delays due to holidays, weekends, etc, are expected, and the IRS itself makes allowances for holidays.

Remember the "Mailbox rule" also applies not just to postmarks on physical letters, but electronic filing AND electronic delivery, as well.

"For purposes of this subsection, the term “designated delivery service” means any delivery service provided by a trade or business if such service is designated by the Secretary for purposes of this section. [If the business] (C) records electronically to its data base (emphasis mine), kept in the regular course of its business, or marks on the cover in which any item referred to in this section is to be delivered, the date on which such item was given to such trade or business for delivery..."

So, if the taxpayer initiated payment with the payroll service and the bank, and has an electronic proof of such delivery, then that means that the taxpayer is in the clear. I don't see how it could be otherwise, since the IRS has no longer given most businesses the choice of using federal deposit coupons.

Ckenefick (talk|edits) said:

21 February 2014
There's no indication that the taxpayer, or the payroll service, initiated anything in 2013.

Tax Writer (talk|edits) said:

21 February 2014
Then why would the payroll service have included the amount in the 2013 YE payroll filings, rather than in the FQ 2014?

Ckenefick (talk|edits) said:

21 February 2014
Who knows. I could put together a 2014 W2 for myself right now if I wanted to with numbers I expect to pay later in the year. I could prepare all the other payroll reports too. I could do all of this without having paid myself a dime.

Craigums (talk|edits) said:

22 February 2014
The taxpayer did initiate prior to the end of the year per the payroll reports.

As to Tax Writer's question re: why? Yes. Why? That's what I'm wondering. I don't understand why something that seems so careless would happen from a company that purports to specialize in compliance of such a specific field.

Ckenefick (talk|edits) said:

22 February 2014
I really don't get your amazement over this situation. Certainly, the stuff can't be withdrawn on 1/1, which is a national holiday. So, it's really just a day after the fact...Big deal. If it was initiated by year-end, treat it as outstanding and move on.

There must have been some reason why it couldn't have been withdrawn on 12/31. Maybe it was initiated too late in the day on 12/31. Maybe your client had something to do with it. It really isn't all that uncommon. The reverse happens too, don't you know.

If you really really want the answer, speak to your client and the payroll service, but you'll probably find that no one was negligent here.

Bushmaster (talk|edits) said:

24 February 2014
There is no issue here. Reports match to w-2, match tax return, etc. If you are trying to be super accurate with this, why not include pennies on your tax return? (I worked for a firm that did this) You will create a lot of work for yourself, IRS, state taxing authority, for what will be NO change. Move on.

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