2007 form 1120S Sch A Ln 3 "cost of labor"

[AZ-Tax]

The bookeeper is only including 1099 subcontractors under COGS but in reality both the subcontractors and W-2 payroll employees played a part in the labor for the finished product. Should the "Direct Labor or W-2 payroll employees" expense or cost be included in this line? If so should the subcontractors cost be on Ln 4 opposed to Ln 3 (w-2 employees) for it all comes out the same?

[JG EA]

It does all come out the same. I've seen it done both ways. But I do know that the IRS looks for wages (W-2 Box 1 totals) on the wages line of the tax return. Or in this case the total of the Salarys and Wages lines.So it is good that it is there and matches to avoid inquiry.

Also, labor for subs if it is directly related to the products does seem to be better there (in my opinion) than under operating type costs. It lowers the total income instead of the operating costs being inflated.

[AZ-Tax]

I dont see a line "salarys and wages"

[QUOTE=JG EA;86780]It does all come out the same. I've seen it done both ways. But I do know that the IRS looks for wages (W-2 Box 1 totals) on the wages line of the tax return. Or in this case the total of the Salarys and Wages lines.So it is good that it is there and matches to avoid inquiry.

Unless I missed something, I dont see a line "salarys and wages" that does not pertain to Officers and/or shareholders on form 1120S.

[S T]

1120s

First Page of Form 1120S
Line 7 - Compensation of Officers
Line 8 - Salaries and Wages

Sandy