Monday, April 07, 2008
On the phone with the IRS
I knew I had a complicated tax question to answer (reason numero uno I would prefer a consumption tax to an income tax - a consumption tax is soooo much simpler), but I've now been kicked up the IRS response chain two three times when the representatives had no idea how to answer my question.
While complicated to answer, it's pretty easy question to state - I have a sole proprietership with a couple employees1 from which I also paid myself wages. I filed W2s on all my employees (including me). Given that I have a W2 on my wages from my sole proprietership, should the wages paid to me be reported on the main 1040 form or on the Schedule C (business)?
What makes it complicated is as a sole-proprietership, I'm apparently not supposed to file a W2 on wages I pay to myself and that really screws up the IRS instructions.
*update*
Fourth person eventually (long phone call just to explain the issue) suggested I handle it exactly as I had done which is the following.
Report the W2 income on Line 7 of the 1040 (W2 income)
Report the wages paid to myself on line 26 of Sched C (business expense) and the company taxes paid on Sched C.
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While complicated to answer, it's pretty easy question to state - I have a sole proprietership with a couple employees1 from which I also paid myself wages. I filed W2s on all my employees (including me). Given that I have a W2 on my wages from my sole proprietership, should the wages paid to me be reported on the main 1040 form or on the Schedule C (business)?
What makes it complicated is as a sole-proprietership, I'm apparently not supposed to file a W2 on wages I pay to myself and that really screws up the IRS instructions.
*update*
Fourth person eventually (long phone call just to explain the issue) suggested I handle it exactly as I had done which is the following.
Report the W2 income on Line 7 of the 1040 (W2 income)
Report the wages paid to myself on line 26 of Sched C (business expense) and the company taxes paid on Sched C.
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