S-Corp Owner/Shareholder

[peggysioux]

If an s-corp has no employees, would the s-corp be able to take a tax deduction for employee benefit programs for benefits the corporation paid out on the sole shareholder? I would say no; medical/dental insurance needs to be added to W-2's; there was no payroll to have retirement benefits, but previous tax preparer allowed a deduction for some type of employee benefit program. Wanted to make sure there was not something I was missing before I discussed with taxpayer. Taxpayer has asked me to set up her books and look over past returns and there are several items on return that stand out to me. As always, your input is appreciated.

[BOB W]

If an s-corp has no employees, would the s-corp be able to take a tax deduction for employee benefit programs for benefits the corporation paid out on the sole shareholder? I would say no; medical/dental insurance needs to be added to W-2's; there was no payroll to have retirement benefits, but previous tax preparer allowed a deduction for some type of employee benefit program. Wanted to make sure there was not something I was missing before I discussed with taxpayer. Taxpayer has asked me to set up her books and look over past returns and there are several items on return that stand out to me. As always, your input is appreciated.

Unless the SCorp is inactive, it always has at least one employee. Paychecks should be issued regardless of profitability. ( I always look at profitability with my clients, which is wrong.) BUT, if employee benefits are being paid, there should be/has to be, paychecks issued to justify such a write-off.

Where NPD taken?

[peggysioux]

S-Corp - Shareholder/Owner

Unless the SCorp is inactive, it always has at least one employee. Paychecks should be issued regardless of profitability. ( I always look at profitability with my clients, which is wrong.) BUT, if employee benefits are being paid, there should be/has to be, paychecks issued to justify such a write-off.

Where NPD taken?

My brain must be slow this morning being I can't figure out what "NPD" stands for. Can you explain?

Also, I know that there is always an employee is an employee in the SCorp scenario, but the shareholder paid no wages to herself - very small company and tax return showed a 14,000 .loss. That is why I was questioning the employee benefit deduction - thought there might be some type of acceptable deduction that I was unaware of and hoping you all could enlighten me. Thanks for your input!

[DaveO]

I would say no wages, no benefits.

I had a fellow come in a couple years ago who moved in from out of state. He wanted a bid on the preparation of an 1120-S and his 1040. The corp return showed a huge loss with no officer wages. On the 1040 a negative $14,000 was entered on Line 21 titled S-Corp Shareholder Benefits. I guess I missed class the day that item was discussed.

[BOB W]

My brain must be slow this morning being I can't figure out what "NPD" stands for. Can you explain?

Also, I know that there is always an employee is an employee in the SCorp scenario, but the shareholder paid no wages to herself - very small company and tax return showed a 14,000 .loss. That is why I was questioning the employee benefit deduction - thought there might be some type of acceptable deduction that I was unaware of and hoping you all could enlighten me. Thanks for your input!

NPD= Net Profit Distributions

[Burke]

What were the employee benefits? If health insurance or 401k or SEP-IRA contributions, then there should have been a W-2 with this on it.

[ChEAr$]

What were the employee benefits? If health insurance or 401k or SEP-IRA contributions, then there should have been a W-2 with this on it.

And in that case, there WERE wages paid.

[peggysioux]

S-Corp - Shareholder/Owner

I have an appt. with taxpayer to obtain addtional details. However, even if there was wages and W-2 (which there is none shown on tax return), as a greater than 2% shareholder, wouldn't the benefits show up as income on W-2 and not as employee benefits?

[ChEAr$]

I have an appt. with taxpayer to obtain addtional details. However, even if there was wages and W-2 (which there is none shown on tax return), as a greater than 2% shareholder, wouldn't the benefits show up as income on W-2 and not as employee benefits?

Right. For example premiums paid for health insurance for owners I
debit a separate account during the year and at year's end, close that account by transferring balance to wages so that the amounts are reflected on their W2 forms.