ACS41 Posted January 14, 2014 Report Share Posted January 14, 2014 Client is the sole shareholder of an S corporation. Takes a salary of $7,500 a quarter. Also had health insurance of $4,000 for the year and in late December put $12,000 into his Simple IRA. The dilemma is box 2 on the 4th quarter 941: $7,500 + $4,000 health insurance - $12,000 is a negative number so that cannot go on line 2. The sum of the four 941s line 2 should agree to box 1 on the W2. The only thing I can think of is to amend a prior 941. Anyone have this issue? Quote Link to comment Share on other sites More sharing options...
mircpa Posted January 14, 2014 Report Share Posted January 14, 2014 For health insurance I believe box 2 of 941 should read $ 11,500.00 and line 29 of 1040 should read $ 4,000.00 Quote Link to comment Share on other sites More sharing options...
ACS41 Posted January 14, 2014 Author Report Share Posted January 14, 2014 mircpa, I'm good with that except my understanding is that deferred compensation (401k, simple,..) has to be subtracted form box 2 on the 941. When you add the four 941s (box 2) they should agree with the box 1 on the W2. I'm surprised this never happened before. Huh.... Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 14, 2014 Report Share Posted January 14, 2014 "box 2 on the 4th quarter 941: $7,500 + $4,000 health insurance - $12,000" If box 2 is negative, it's negative. The 941's will total correctly. Quote Link to comment Share on other sites More sharing options...
ACS41 Posted January 14, 2014 Author Report Share Posted January 14, 2014 Thank you kcjenkins. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 14, 2014 Report Share Posted January 14, 2014 You're welcome. It's always hard to see any form that has a normal positive value, with a negative, it just "looks wrong". But if it is, because of a situation such as yours, that's still "what it is", so that is what you report. May get a letter questioning it, but your explanation makes sense, so should be no problem. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted January 14, 2014 Report Share Posted January 14, 2014 This is interesting and I've never seen this reporting of negative wages on the 941. I know that the IRS computers only reconcile the W-2/W-3 reporting back to the 941s for 4 lines (SS wages, SS tips, Medicare wages/tips, and federal withholding), so if this reporting of negative wages on line 2 of the 941 is correct then maybe I've learned something new. What I'm wondering though, using the definition of "compensation" for purposes of SIMPLE IRA deferrals, how is it possible in any given quarter for an employee to defer more compensation than is paid to him or is subject to withholding? Isn't this employee's deferral limited to the $11,500 for the 4th quarter? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 14, 2014 Report Share Posted January 14, 2014 Judy, his limit is based on his annual compensation, so the fact that he put it all in the last quarter, while awkward, is legal, according to my reading of the rules. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted January 14, 2014 Report Share Posted January 14, 2014 Yes, I know about the annual limit, I've just never seen a negative on line 2 of the 941. Do you have a reference you could link so that I have this for future use? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 14, 2014 Report Share Posted January 14, 2014 only the instructions themselves, plus personal experience Completing and Filing Form 941 Make entries on Form 941 as follows to enable accurate scanning and processing. Use 10-point Courier font (if possible) for all entries if you are typing or using a computer to complete your form. Portable Document Format (PDF) forms on IRS.gov have fillable fields with acceptable font specifications. Do not enter dollar signs and decimal points. Commas are optional. Enter dollars to the left of the preprinted decimal point and cents to the right of it. Leave blank any data field (except lines 1, 2, and 10) with a value of zero. Enter negative amounts using a minus sign (if possible). Otherwise, use parentheses. Enter your name and EIN on all pages and attachments. Staple multiple sheets in the upper left corner when filing. Quote Link to comment Share on other sites More sharing options...
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