1065 Wages (Restaurant / Tips)

Here's a W-3 (Restaurant):
Box 1 $178,035 (Wages, tips, other comp)
Box 2 12,301 (Fed w/h)
Box 3 162,477 (Soc Sec wages)
Box 4 11,038 SS Tax w/h)
Box 5 178,035 (Med wages and tips)
Box 6 2,581 (med tax w/h)
Box 7 15,558 (Soc Sec Tips)

Salaries and Wages to report on Form 1065 would be (Box 3) $162,477 ......... correct?

Employer Payroll Taxes to report on Form 1065 would be Box 4 + Box 6 + Sui + Futa ....... correct?

No. Employer taxes-SS and Medicare- should be the employer's share, which is not necessarily equal to the amount withheld from the employee's pay. In your numbers, too much SS has been withheld.

Watch out for the 1099-K though. We have a high-end restaurant client who regularly has over $200,000 in credit card tips. If we don't include the tips as income and a corresponding deduction then the 1099-K income will be significantly higher than the gross sales reported on the 1120. It may not be ideal but at least we avoid the notices for under-reported income. Same with sales taxes.

SS tax does equal 6.2 of the SS wages and SS tips. I think it's fine. And I agree with your logic, Bob. That's what I'd use. It has to work from a cash out standpoint.

Yes it is 6.2% but it's computed on more than the SS wage base.
In other cases there could be add'l Medicare withholding that is not matched by the Employer.
EDIT: I thought OP said it was a W-2. Now I see it says W-3.

Don't forget the Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips on Form 8846.

I have a restaurant client that used to be taxed as a 1065 where two of the partners got tips. We made an S election for them so that their tips would qualify for this credit along with the other employees' tips.

There's no matching on the IRS's end on this. Thus, there is no NEED to make this tie. If the client hasn't properly recorded wages in their system, then an adjustment is necessary. However, that doesn't mean there is a right/wrong answer here. An accrual based taxpayer would never tie to the W-3, for example. Also, there might be a split between page 1 and Form 1125-A, with the COGS number including payroll taxes.

If the taxpayer is cash basis, I'd adjust to Box 5 wages.

There's no matching on the IRS's end on this.

There is an entire department at the IRS...

https://www.gao.gov/products/113436

The document matching program is a powerful tool for detecting, on a mass scale, taxpayers who under-report or do not report their income.

If my business' gross income is 2,000,000 and the IRS receives 1099-K's totaling 2,400,000 including tips and sales tax I am certainly going to include the tips and sales tax in gross receipts on the tax return.

There is no document matching for W-3 and wages reported on the return. As I noted, there are many instances in which a match would NEVER and PROPERLY occur. The OP only brought up his W-3.

Of course, I'm aware of the many OTHER areas in which matching is performed by the IRS.

Completely agree Captain. I was only referring to my first response regarding including the tips in gross income even though it shouldn't be there. That's the matching issue I would try to avoid.

We are on the same page