Form 1125-E, Compensation of Officers
Form 1125-E itemizes the compensation paid to corporate officers. Corporations with total receipts of $500,000 or more attach it to support the officer compensation deduction on their return.
This is the genuine IRS PDF, unmodified. Source: IRS official page.
What is 1125-E?
Certain entities with total receipts of $500,000 or more use Form 1125-E to give a detailed breakdown of the deduction for compensation of officers claimed on their income tax return, such as Form 1120 or 1120-S. For each officer, the form lists their name, Social Security number, percentage of time devoted to the business, stock ownership percentages, and the amount of compensation.
The total is reduced by any officer compensation that belongs elsewhere on the return, for example amounts included in cost of goods sold, and the remainder carries to the officer compensation line of the main return.
Who files 1125-E?
- C corporations filing Form 1120 with total receipts of $500,000 or more that deduct officer compensation
- S corporations filing Form 1120-S over the same threshold
- Other corporate filers, such as Forms 1120-C or 1120-F, when their instructions require it
- Smaller corporations under the receipts threshold generally do not attach this form
How to fill out 1125-E
- Enter each officer’s name and Social Security number.
- Record each officer’s percentage of time devoted to the business and their ownership of common and preferred stock.
- Enter each officer’s compensation and total the column.
- Subtract compensation of officers claimed elsewhere on the return, such as in cost of goods sold.
- Download the completed PDF and attach it to the corporation’s income tax return; the net amount carries to the officer compensation deduction line.
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Frequently asked questions
Which corporations must attach Form 1125-E?
Generally those whose total receipts for the year are $500,000 or more and that claim a deduction for officer compensation. Below the threshold, officer compensation is simply entered on the main return without the detail schedule.
Does officer compensation include distributions to S corporation shareholders?
No. Form 1125-E reports compensation for services, wages reported on a W-2. Shareholder distributions are not compensation, though the IRS expects shareholder-officers who work in the business to take reasonable wages.