Wages from prior year paid this Year - What is its impact to Schedule L for 1120S

[zoldyck32]

Hello!!

We have some 2020 payroll payments that were paid in 2021. We follow a cash basis accounting so I deducted only the 2021 payroll that was actually paid in the 2021 1120S return.

How will these payments impact my Schedule L? Should I deduct it from my Cash to balance the Sched L? Would love to hear your thoughts on this.

Thank you!

[qbteachmt · Accepted solution]

You might be confusing Pay Period and Pay Date. Also, Cash or Accrual Payroll.

The Pay Date in 2021 that is for time worked (pay period) of 2020 still is 2021 payroll. An Accrual Entity will accrue that, and that means the amount is offset by the time you get to year end for the next round of accrual.

You mention you are Cash Basis, so nothing about what you explained even applies to you.

About the only time it matters is if someone wants Bonus paychecks in the same year that they consider it earned, or they need a final paycheck to be able to include taxable fringe benefits, shareholder health, etc, on the year's W2. They might do one extra check run, for these reasons.

[zoldyck32]

Great, thanks

[qbteachmt]

For this: "so I deducted only the 2021 payroll that was actually paid in the 2021"

Look at your 941 reporting and W3/1099. That's what the entity told the IRS.