SJ said:
He
always lists my salary on line 12 of 1120 (corresponding entry
in Schedule E) instead of using line 13 of 1120 for salaries
and wages.
Well, the instructions for Form 1120, while allowing you not
to fill in Schedule E, do *NOT* say that officer salaries
are not reported on line 12. Rather, the instructions
clearly state right up front that deductible officer
compensation must be reported on line 12--and then go to
state that if total receipts are more than $500,000, *then*
Schedule E must be filled in.
Basically, that means you use line 12 no matter what, but
can *optionally* omit the detailed entries of Schedule E if
you wish so long as gross receipts are less than $500,000.
As for why your accountant fills in Schedule E anyway--I
suspect it may be a cost/benefit issue. The accountant
could check every single return and omit Schedule E for each
one that had less than $500K in gross receipts, and charge
accordingly for doing that work. Or, in the alternative, the
accountant could simply allow the software to flow the
information through (likely proforma'd from year to year
except for the amount) without regard to that issue. From
the standpoint of work being done, it's actually more work
to "save" filling out that schedule.
As Michael and others have noted, the issue of officer
compensation can be touchy with the IRS. If your return is
"kicked out" for examination based on officer compensation,
a live person would look at your return. If the detail of
compensation is not on Schedule E, the person making the
decision will know the only way to find out what makes up
that number is to let the return be examined and the person
may assume a "bad" answer is possible. And, as long as
we're going to examine the return, the IRS might want to
pick up a couple of other items <grin>.
If the information is disclosed, then the answer is there
without an exam being required. Now if the answer is bad,
an exam might take place anyway--but since I doubt the IRS
will assume a "good" answer I doubt there would be many real
cases where having filled in Schedule E would cause an exam
that otherwise wouldn't take place. Even worse--if the
accountant omits it and then you happen to go over $500,000
there's a risk that Schedule E won't be filled out when the
instructions say to do so--and then your return could look
suspicious.