REG – Wiley SIM – 1120S & K-1

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  • #192189
    Tux
    Member

    In the Wiley SIM TBSRWO 0011

    It’s regarding Eve, Inc. and it requires you to enter amounts that would go on both the 1120-S and the K-1………

    Why is the K-1, line 1 answer $0 ??

    The $86,000 is compensation to the sole shareholder, Loreck.

    Why does this amount not go onto the K-1?

    FAR - 86 - 2/27/14
    AUD - 75 - 5/29/14
    BEC - 80 - 8/31/14
    REG - 89 - 2/27/15
    Praise Jesus! I'm done!!

    Study resources:
    Becker
    Wiley test bank

Viewing 4 replies - 1 through 4 (of 4 total)
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  • #648090
    lauren725
    Member

    I have not seen this SIM, but is it a guarantee payment to him?

    AUD - 73,91
    FAR - 79 - Thank you God!
    BEC - 73,79!!!!
    REG - 92 whatttt??!

    I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

    Done! Praise God!

    #648091
    Tux
    Member

    Thanks!

    My friend explained it to me –

    Because it's an S-Corp, any compensation will be reported on a W-2, NOT on the K-1.

    So, yes – if it was a partnership, it would be considered a guaranteed payment and would show up on the K-1 (which is why I was confused about why this is not done the same way)

    BUT, since it's an S-corp, the compensation/wages amount paid to the shareholder is reported on a W-2 and NOT on the K-1.

    The shareholder will receive both a K-1 for pass through items, and a W-2 for wages.

    Good to know!!!

    FAR - 86 - 2/27/14
    AUD - 75 - 5/29/14
    BEC - 80 - 8/31/14
    REG - 89 - 2/27/15
    Praise Jesus! I'm done!!

    Study resources:
    Becker
    Wiley test bank

    #648092
    lauren725
    Member

    Very interesting! I have not seen that. I just tried looking it up in the IRC under S Corp but could not find anything. that is tricky!

    AUD - 73,91
    FAR - 79 - Thank you God!
    BEC - 73,79!!!!
    REG - 92 whatttt??!

    I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

    Done! Praise God!

    #648093
    Tux
    Member

    Yes, The IRS does not seem to “connect the dots” for us.

    Looks like we're supposed to know that “wages” have to be reported on a W-2.

    IRS explains that payment for services to officers are considered wages.

    And then, in the instructions for a W-2, says – an employee who is paid $600 or more for services must receive a W-2.

    So, I guess we have to put 2 and 2 together.

    “Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to shareholders.”

    from this link


    https://www.irs.gov/uac/Wage-Compensation-for-S-Corporation-Officers

    Then, also –

    “Every employer engaged in a trade or business who pays…$600 or more for the year… for services performed by an employee must file a Form W-2 for each employee (even if the employee is related to the employer)”

    from this link


    https://www.irs.gov/uac/Form-W-2,-Wage-and-Tax-Statement

    FAR - 86 - 2/27/14
    AUD - 75 - 5/29/14
    BEC - 80 - 8/31/14
    REG - 89 - 2/27/15
    Praise Jesus! I'm done!!

    Study resources:
    Becker
    Wiley test bank

Viewing 4 replies - 1 through 4 (of 4 total)
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