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Compensation paid to workers of a business who are legally classified as employees.
Compensation paid to an owner in the form of W-2 or 1099 income will appear on the profit & loss statement as an expense. Every employer engaged in a trade or business who pays money for a work or service, including non-cash payments of $600 or more for the year for services performed by an employee, must file a Form W-2 for each employee (even if the employee is related to the employer) from whom income, social security, or Medicare tax was withheld. Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee’s Withholding Allowance Certificate.
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