Answers · Deductions, assets & depreciation
Can a Business Deduct Employee Wages?
Reasonable wages for services rendered are generally deductible, with payroll tax and reporting requirements.
How it works
The rule, and what it turns on.
Gross wages, employer payroll taxes and liabilities should be separately recorded; owner-employee reasonableness can matter.
Example
$70,000 salary plus employer payroll tax is generally deductible subject to applicable timing rules.
Common mistakes
What we see go wrong, and what we do instead.
- Recording net pay only.
- Worker misclassification.
A better approach
- Reconcile Forms 941/W-2 to GL.
Authority
Where this comes from, so you can check it.
IRC §162(a)(1); employment tax and information-reporting provisions in IRC §§3101-3128, 3301-3311 and 3401-3512.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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