How to Report 401K payments for Sole Member S Corporations

If you are the sole owner of an S corporation and you contribute to a 401(k) plan, how it should be reported depends on the type of contribution. The contributions are made as:

1. Employee Elective Deferrals

If you are taking a salary from the S corporation, you are considered an employee.

• Your 401(k) elective deferrals (the portion you contribute from your wages) are deducted pre-tax from your payroll.

• These contributions appear on your W-2 (Box 12, Code D).

• The S corporation deducts these contributions as part of wages expense on its Form 1120-S.

2. Employer Contributions (Profit-Sharing or Matching)
   If your S corporation makes employer contributions to your 401(k) (e.g., matching or profit-sharing), these are considered business expenses.

• They are not included in your W-2 wages.
• The S corporation deducts them separately on Form 1120-S, Line 17 (Pension, Profit-Sharing, etc.).
• These contributions are not subject to payroll taxes but are still subject to annual contribution limits.

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When Are 401(k) Contributions Reported in Box 1 on a W-2?

401(k) contributions only appear in Box 1 if they are:

After-Tax Contributions

If the employee contributes to a Roth 401(k), those contributions are taxable and included in Box 1 (but still reported in Box 12, Code AA).

Excess Contributions Not Removed on Time

If an employee exceeds contribution limits and does not correct the excess by the deadline (April 15 of the following year), the excess amount is taxable and included in Box 1 of the W-2.

Non-Tax-Deferred Retirement Plans

If the plan does not qualify for tax deferral, the contributions may be included in taxable wages (rare for a standard 401(k) plan).

Key Points

• Contributions must be made from payroll wages, meaning you must pay yourself a reasonable salary from your s corporation to contribute
• Shareholder distributions (amounts taken out that are not wages) cannot be used to fund a 401(k).
• 401(k) contributions do not appear on Schedule K-1—only wages (reported on Form W-2) impact personal tax reporting.
• 401(k) contributions from a sole member s corporation are not typically reported in Box 1 (Wages, Tips, Other Compensation) on Form W-2, because:
  • Elective Deferrals (employee contributions) are pre-tax, meaning they reduce taxable wages for income tax purposes and are instead reported in Box 12 (Code D).
  • Employer Contributions (matching or profit-sharing) are not part of wages and do not appear on the W-2 at all.

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