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Discussion:W-2 for S-Corp shareholder with SEP w/h

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Discussion Forum Index --> Advanced Tax Questions --> W-2 for S-Corp shareholder with SEP w/h


Discussion Forum Index --> Tax Questions --> W-2 for S-Corp shareholder with SEP w/h

Riki EA (talk|edits) said:

29 January 2009
Hi all,

We have an existing client (S-Corp, 100% shareholder) who did his own payroll this year through an online service, and asked that we prepare the W-2. He took a $100,000 salary over the year, but the twist is that he had $10,000 withheld from his pay for his SEP-IRA. He was basically treating it like a 401(k), rather than having his S-Corp directly fund the SEP. We'll have him straightened out for 2009, but I'm a little uncertain how to prepare the W-2.

Here's my inclination: -Have the 1120s show the deduction for $100,000 shareholder compensation. -Report $100,000 in Box 1, 3, 5 on the W-2. (FICA was withheld properly on $100,000.) Maybe put the $10,000 with a code in Box 14. -Deduct $10,000 as a SEP-IRA contribution on the front page of the 1040. (He may want to add more.)

A colleague thought though that instead I should show $90,000 in Box 1, $100,000 in Box 3 & 5, and not take the SEP-IRA deduction on the 1040, but since a SEP-IRA isn't a salary deferral arrangement, that doesn't seem right. Next year we'll have his S-corp make the contributions.

Thanks for any help! Riki

Uncle Sam (talk|edits) said:

29 January 2009
I suggest you book a journal entry Dr SEP-IRA Plan
                                  Cr   Employee Loan Payable

for the $ 10,000.

Prepare the W-2 the way you mention, but don't put the $ 10,000 ANYWHERE on the W-2.

The only thing is, the $ 10,000 MUST be paid by Jan. 31st - the time when it must have been paid in to the plan.

Your friend is thinking of the 401(k) or SIMPLE plan.

Uncle Sam (talk|edits) said:

29 January 2009
Ooops. Sorry about the date - the date the payment should be made is by the tax return filing date - 3/15 if a calendar year corporation.

I was thinking of the deadline for a tax deferral - SIMPLE and 401(k).

WIBadgerCPA (talk|edits) said:

29 January 2009
I agree with Sam.

Riki EA (talk|edits) said:

29 January 2009
Thanks! That makes a lot of sense. -Riki

Olycraig (talk|edits) said:

29 January 2009
I agree too, with further explanation: Sounds like you're trying to make it into a SARSEP (salary reduction SEP) but unless you grandfathered in back in 1997(?) those are no longer available. A regular SEP is a company contribution, not an employee contribution, so it doesn't go on the W-2, other than the check box to say there is a retirement plan. The company deducts the correct gross pay, and deducts the retirement contribution. If the correct gross is $100,000, then the company needs to pay him back the $10,000 withheld in error. No personal deduction.

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