Husband and wife SCorp both make elective deferrals through payroll to a SIMPLE IRA and both have health insurance grossed up in Box 1 of W-2 then deducted on 1040.
1) Officer compensation line 7 1120S should match to W-2 box 3 or 5??? for both husband and wife officers? Health insurance is deducted on 1120S as employee benefit plan expense.
2) Wage expense on the business books should include the elective deferral for the SIMPLE IRA that way the business gets the deduction for the expense paid for the employee's elective deferral? Similar to state withholding, fed withholding and EE payroll taxes.
3) Employers contribution 3% SIMPLE IRA match is an expense on the business books as retirement contribution and reported on Line 17 of 1120S?
4) SIMPLE IRA elective deferral is not included in Box 1 W-2 for wages so they are paying less in taxes on their 1040. There is no additional reporting on the 1040. Form 1040 Line 28 is SIMPLE IRA reporting for a sole proprietor or partner in partnership?
This is probably much simpler than I am making it so I am posting to the tax warriors to simplify the mechanics and flow through from books to 1120S and 1040 tax returns. I want to be able to explain to my client in non accounting language that they are getting the deductions once....not twice and that the right numbers are being reported on all tax returns.
Thank you!!