I always do my own 1120S and 1065 tax returns (like many of you) but then send all of the information over to the CPA to see if what he comes up with matches my numbers. I may end up stop using a CPA but for now, I like to learn this way. It is like the days of test taking in school.
My question is concerning payroll. Do you put GROSS or NET on the payroll (salaries and wages) parts of business tax returns?
For example, lets say that I had $40,000 worth of payroll that is disclosed on W3 under "wages, tips and other compensation". That is what was paid out. However, that is gross. That doesnt include the several thousand in federal, social security and medicare tax withheld. Really, what was paid out to employees was more around $37,000. The $3,000 difference was withheld from employees, eventually paid to the appropriate government entities as well as employer match.
So would the 1120S corporate or 1065 tax returns list payroll as: $40,000 and then $1,500 (employer match) under taxes? Or is it more appropriate to have $37,000 as payroll and $4,500 under taxes ($3,000 employee withholding and $1500 employer match).
These are obviously guesstimates, not hard numbers. But hopefully I explained the confusion. It seems either way your bottom line NET P/L is the same, regardless if net or gross in payroll, but i'm sure that there is a correct way of doing this.