Where would you put it

[BOB W]

I picked up an 1120S last year with no activity. This year they do. In completing the 1120S the client says that there are 4 shareholders but only one of them is a Officer. When I complete the 1120S where would you list all of their incomes. The one who is the officer would go on the proper line, but what about the other three? Just as wages? And in filling out the Officers Compensation screen do I just ignore the other Shareholders even though my program picks them up as officers in the input screen?

[Bees Knees]

Instructions to line 7 and 8 for the 1120S say:

Enter on line 7 the total compensation of all officers paid or incurred in the trade or business activities of the corporation. The corporation determines who is an officer under the laws of the state where it is incorporated.

Enter on line 8 the total salaries and wages paid or incurred to employees (other than officers) during the tax year.

Nothing is said in those instructions that suggest an officer is the same as a shareholder. In contrast, the line 18 instructions for employee fringe benefits uses the term “employees owning 2% or less of the corporation’s stock…”

Thus, if line 7 was for shareholders, the instructions would have said “employees owning stock…” Thus, you can be a shareholder of the corporation and still have your wages reported on line 8 if that shareholder is not an officer of the corporation under state law.

I’m not sure why Form 1120S needs to make a distinction between officer employees and all other employees (including shareholder employees who are not officers). Probably it is because corporate officers are always considered employees if they receive compensation for services performed. If the S corporation reports wages on line 8 and nothing on line 7, it indicates the corporate officers may be pulling money out of the corporation other than through wages, which would be a red flag.

[BOB W]

Thanks Bees that's the way I handled it.