They are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. Therefore, this additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax Statement, issued to the shareholder, but would not be included in Boxes 3 or 5 of Form W-2.

How do I pay myself from my C Corp?

There is generally one way to pay yourself from your C corp: as an employee. More specifically, if you’re involved in the day-to-day operations of running your C corp, then you’re considered a W-2 employee. Therefore, you will receive compensation via a W-2 that will also be subject to payroll taxes.

When to enter W2 wages as officers compensation?

As a TurboTax Business agent, I’d be happy to answer that question for you. Strictly speaking, if you are a significant owner (or the sole owner) of an S-Corporation, and you actively perform services for it, then you would enter your W-2 wages as “Officers Compensation,” rather than “Employees Salary.”

What do you need to know about officer compensation 1120?

Finished an 1120. Officer had $25,000 in “compensation of officers” line 12. If you finished the 1120, YOU need to know what that “compensation” is. In most cases, that means they received wages and have a W-2. Assuming that is the case, you enter the W-2 on the 1040.

When to use form 1125-e for C Corp?

If your corporation has receipts in excess of $500,000, and you report Officers Compensation, then you’ll use Form 1125-E too (just like an S-Corp). That tax form, again, is included with the C-Corp tax package as part of the TurboTax Business product. Thanks again, and good luck to you!

Is the IRS keeping an eye on C Corporation compensation?

Earlier this week, the Tax Court decided H.W. Johnson, Inc. v Commissioner, a case that offered a great reminder of two things: the IRS is still keeping an eye on C corporation compensation, and 2. if you do things the right way, you can successfully defend your compensation in the face of an IRS attack.