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941 and W-2 matching for S Corp?

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so once again we are trying to get the S Corp W-2's correct by adding in the Health Insurance paid by the company for that member more than 2%.

How does the 941 get filled out to balance? The instructions do not mention taking the health insurance back off... and for gross wages to balance with the W-3 and the 4 quarters, the health insurance needs to come out so as not to charge soc sec and medicare?

Or do we not care if they balance and are off by the health insurance amount?

Looking ahead and trying to get Paychex to do the W-2's correct for the couple of S Corps they do.

Thank  you for any insight,


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The gross wages on the 941 do not need to match the social security \ Medicare wages. The first wage line will be grossed up for the health insurance and this should tie out to box 1 of the W-3. The shareholder then will report that number as wages and deduct the health insurance on the proper line.

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The only regulation for reporting the 2% shareholder insurance has to do with W2 reporting.  Some claim it must also be on a 940 and 941, but I have never seen such official instruction.  rfassett agrees with me, and the 941 instructions - the instructions say the 941's and W2 should match, but they do not have to.  The one caveat is one should keep notes as to why they do not match.

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If your W2s don't tie to your 941s, the IRS will ask why. I'd rather avoid unnecessary letters. Besides, when we add health insurance and personal use of vehicles in QB, the 941 & 940 come out correctly and do tie to the W2s.

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Abby,  I get it.  I have been dealing with this for years.  I know the rule only applies to the W2, and the instructions for 941 allow them not to match (I always remain open to being proven wrong).  So instead of defending the rules, I also allow those who insist to alter their 941 if they wish to, in spite of not one person has ever shown me, nor have I ever found, any direction from the IRS do do so.

My point is since there is no direction requiring altering the 941, doing so is actually wrong, although clearly what many prefer to do, believing having matching 941/W2 figures is required, or more important, than not adding figures when it is not required.  Since there is no direction requiring it to be added to a 941, no one knows when to add it, every Q, as paid or as earned, or as a lump amount on one Q form... In my case, those who are insistent, are asking for some way to make the 941/W2's match, and since the question is never asked until Q4, we allow them to alter their Q4 941.

It is one of those things which has "come to life", just like the annoying receipt of 1099's by those who were not required to receive them, because it is easier for the sender to blindly send to all, versus figuring out if the recipient is subject to 1099 reporting, or was even paid beyond the threshold.

I have to personally deal with the unneeded 1099's myself. If I was worried that the IRS receiving an unneeded 1099 was an issue, I would go crazy!  It is for a substantial amount my wife is paid, for remaining home to care for our disabled daughter.  By law, it is not taxable income, and she had to sign a notice to the entity paying, that it was not taxable, but still comes the 1099.  It makes my wife nervous every year, but the IRS has yet to come calling.

Same for a state which recently asked for something to be done on a W2.  It was a request, impossible to do (a long description, in a short space, in a large font). Some took this "request" as a requirement.  In that case, I had to stick to the rules, and explain why, since meeting the request is physically not possible, given the space on the W2.  The request had NOTHING to do with tax collection or reporting, it was merely a misguided way to try to get taxpayers to not complain to the tax agency, when they cannot read the small writing required to fit what the tax agency wants to fit in the little box!


"If the amounts don't agree, you may be contacted by the IRS or the Social Security Administration (SSA)." (Does not say they must or are required to agree)

"When there are discrepancies between Forms 941 or Form 944 filed with the IRS and Forms W-2 and W-3 filed with the SSA, the IRS must contact you to resolve the discrepancies." (Still does not say they must agree)

Here is the "winner": "Amounts reported on Forms W-2, W-3, and Forms 941 or Form 944 may not match for valid reasons. For example, if you withheld any Additional Medicare Tax from your employee’s wages, the amount of Medicare tax that is reported on Forms 941, line 5c, or Form 944, line 4c, won’t be twice the amount of the Medicare tax withheld that is reported in box 6 of Form W-3. If they don't match, you should determine the reasons they’re valid. Keep your reconciliation so you’ll have a record of why amounts didn't match in case there are inquiries from the IRS or the SSA."



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