[bean counter]

Working a Ninja SIM problem which adds vacation expense into salaries/wages on line 13 of form 1120. Curious to know why this amount wouldn’t be added into line 24 (employee benefit programs). Just thinking it through, vacation expense seems like it would be classified as more of a benefit rather than a salary. Any advice on this one?

BEC - 84 *
AUD - 73, 76 *
REG - 70, 72
FAR - 09/08/16

[Andyred04]

Since the employee receives money (vacation pay) not benefits (healthcare, life insurance, etc.), it goes to salaries & wages. I remember missing this one too but it made sense after I looked it up.

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[Broag]

Lindsay-

It's hard to tell without seeing the entire SIM, but typically vacation pay is considered an employee benefit. https://www.irs.gov/publications/p535/ch02.html

Does it give an explanation as to why they are doing that?

REG - 79
FAR - ?
AUD - ?
BEC - ?

[MidwestCPA]

Think about it in terms of taxes. As an employer, do you pay taxes on vacation and sick pay? Absolutely. So say I have one employee who takes 52 weeks of vacation from January to December. I've had to pay the employer share of payroll taxes, unemployment, etc. on in this employee. Why would I have amounts included in payroll taxes and employee benefits but no salary/wages? I've also heard the IRS reconciles salaries and payroll taxes expense to what you send in on the W2s for the year.

[Missy]

It is salary because the employee earned it, it is not part of a benefit program. Benefit programs are insurance, pension (line 23), etc. and because as midwest said above it is subject to payroll taxes.

If you read the instructions for line 24 they say

Enter contributions to employee benefit
programs not claimed elsewhere on the
return (for example, insurance or health
and welfare programs) that are not an
incidental part of a pension, profit-sharing,
etc., plan included on line 23.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Author]

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