Level 4

Partner wages paid on W-2

Forum|Forum|4 years ago
September 29, 2021
2 replies
17 views

An LLC with two members files taxes as a partnership. We are just now preparing and filing 2016 tax returns and have discovered the two members paid themselves W-2 wages in 2016. I know this is incorrect and these amounts should have been categorized as guaranteed payments. I am curious how others would recommend correcting this at this point. I am thinking we should file amended W-2s, but since it is from 2016, can we just report the amounts as guaranteed payments on the 1065 (including the 1/2 of the FICA taxes paid by the LLC).

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sjrcpa

Level 15

I wouldn't do Guaranteed Payments because on their 1040 they'd need to report the GPs and the W-2s.

Yes this is wrong. I'd prepare the return with the info given. On the 1065 deduct the wages. CAGMC.

You probably have this for 2017-2020, too?

Advise them of the error of their ways and have them stop.

The more I know the more I don’t know.

M

mhkdgalAuthor

Level 4

Thanks for your reply. Yep, they took w-2 salaries in 2017 through 2019 also. They didn't in 2020 due to lack of funds and covid shutdown. Thanks for your input on how to handle this. What does CAGMC in your reply stand for?

Thank you!