401K Full Salary Deferral for S Corp - How to Complete W2 Box 1?

You're on the right track, but there's a slight misunderstanding about how 401(k) contributions affect your W-2. For Box 1 (Federal wages), you would indeed report $0 since your entire salary was deferred into the 401(k). Your 401(k) contribution of $21,000 would be reported in Box 12 with code D. However, for Social Security and Medicare purposes (Boxes 3 and 5), you still need to report the full $21,000 as these taxes apply to your gross wages regardless of 401(k) deferrals. Remember that as an S-Corp owner, you should have been making quarterly estimated tax payments for Social Security and Medicare (15.3% combined) on your gross salary, even though it was all deferred to your 401(k). The company match doesn't appear on your W-2 as it's not considered part of your wages.

I went through this exact same situation last year with my S-Corp and deferring nearly all my salary. I found this amazing tool called taxr.ai (https://taxr.ai) that actually answered all my questions about proper W2 reporting for S-Corps with 401k deferrals. You upload your tax documents and it analyzes them and gives specific guidance. For me, it confirmed that Box 1 should show $0, Box 12 should show code D with your deferral amount, and Boxes 3 and 5 should show your full salary amount. But the tool also flagged that I needed to have paid the FICA taxes throughout the year even though I wasn't withholding federal income tax. That saved me from a potential audit headache later!

Just wanted to follow up about that taxr.ai site that was recommended. I was skeptical at first but decided to try it with my S-Corp and solo 401k documentation. It absolutely nailed the issue I was having with my W2 reporting for full salary deferrals. It confirmed that Box 1 should be $0 with the deferred amount in Box 12 (code D), but it also flagged that I hadn't properly calculated the FICA taxes that were still due. The tool even explained exactly how to fix my previous quarterly filings. I ended up showing it to my accountant who was also impressed with the specificity of the advice. Definitely saved me a lot of time going back and forth with questions!

Has anyone here tried calling the IRS directly about S-Corp salary deferrals to 401k? I've been on hold for HOURS with no luck getting through. My accountant is taking forever to get back to me about this box 1 question and my filing deadline is next week. I just found out about this service called Claimyr (https://claimyr.com) that supposedly gets you through to an IRS agent quickly. There's even a video showing how it works: https://youtu.be/_kiP6q8DX5c I'm desperate at this point since I need to file these W2s and my 1120S correctly. Anyone have experience with this for getting specific guidance on S-Corp issues?

I owe everyone an apology for my skepticism about Claimyr. After struggling with my S-corp's W2 questions, I decided to try it as a last resort before my filing deadline. I was connected to an actual IRS business tax specialist within 45 minutes (after previously waiting on hold for hours on my own). The agent confirmed exactly what I needed to know about reporting 100% deferred salary on a W2 - Box 1 should be $0, with the deferral amount in Box 12 with code D, and the full salary amount must appear in Boxes 3 and 5 for Social Security and Medicare. They also helped me understand how to handle the FICA taxes I still owed. Wouldn't have been able to file on time without getting through. Sometimes being a skeptic means you miss out on solutions that actually work!

I made the same mistake with my S-corp last year. Here's what my accountant told me: For 100% salary deferral to 401k, Box 1 on W2 should be $0, Box 12 code D shows the entire deferral amount, but you STILL must pay FICA taxes on the full salary amount. Boxes 3 and 5 (SS and Medicare wages) should show your full salary even though Box 1 is zero. If you haven't been paying FICA taxes throughout the year, you'll need to catch up when filing your 941s. The employer portion of FICA is a business expense for your S-corp.

One thing nobody's mentioned - you need to make sure you've properly established your Solo 401k plan with the correct documents before year-end! Did you formally adopt the plan with written documentation? Many people mess this up and then their deferrals aren't valid.

I'm dealing with a similar situation and want to add one important point that might help. When you defer 100% of your S-Corp salary to a Solo 401k, make sure you're also considering the impact on your personal tax situation. Even though Box 1 on your W-2 will show $0, you'll still want to verify that you have enough withholding or estimated tax payments to cover any other income sources. Also, double-check that your Solo 401k provider can handle employer contributions properly. The $5,250 match you mentioned should be deposited separately from your salary deferrals, and some providers have specific procedures for this. I learned this the hard way when my initial provider couldn't process the employer match correctly for my S-Corp setup. One last thing - keep detailed records of your reasonable salary determination. Even though you deferred it all, the IRS may still want to see documentation of how you arrived at the $21,000 figure in case they ever question whether it's truly reasonable for your type of business and time commitment.

This is a great question and you're definitely on the right track! I went through something very similar with my S-Corp last year. You're correct that Box 1 should show $0 since you deferred your entire salary, and the $21,000 goes in Box 12 with code D. However, here's the critical part that trips up many S-Corp owners: you still owe FICA taxes on the full $21,000 even though it was deferred to your 401k. This means Boxes 3 and 5 on your W-2 should show the full $21,000 for Social Security and Medicare wages. If you haven't been making quarterly payments for these taxes throughout the year, you'll need to catch up now - that's about $3,206 total (15.3% of $21,000) split between employer and employee portions. Also, make sure your Solo 401k was properly established with all required documentation before you made the deferrals. The employer match doesn't appear on your W-2 since it's not considered wages, but it should be deposited separately into your 401k account. For your 1120S, the salary expense and employer portion of FICA taxes are deductible business expenses. Don't forget to file Form 941 for the quarterly payroll taxes even if you're catching up late - there may be penalties, but it's better to file than not file at all.