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It looks like you are referring to Form 1120-S, the S Corporation return. If that is correct, then each shareholder (partner) should receive a K-1 form AND a W2 form for the amount paid out as compensation. The K-1 form shows the residual income of the company and various other tax items that are reported at the shareholder level, while the W2 shows just the salary payments. The salary payments are deductible from taxable income, so the same amount isn't taxed twice.