Answers · S corporations
How Should S Corporation Payroll Be Recorded?
S corporation payroll should record gross wages, withholding, employer taxes, liabilities and net cash so books tie to Forms 941/W-2.
How it works
The rule, and what it turns on.
Owner payroll also intersects with reasonable compensation and fringe-benefit rules.
Example
$10,000 gross payroll may produce $7,500 net cash, $2,500 employee liabilities plus separate employer payroll tax.
Common mistakes
What we see go wrong, and what we do instead.
- Recording only net pay.
- Unreconciled payroll liabilities.
A better approach
- Reconcile payroll reports to GL quarterly.
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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