abctax55
Level 15
02-25-2023
06:40 PM
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There are dozens of threads on this.
1) Fire the client.
2) File late PR tax returns & W-2's. Yep, there will be penalties. The price one pays for not following the very specific rules that are stated in the letter from the IRS granting S-Corp status. THIS is the correct way to do it.
3) Flush the "reasonable salary" amount thru a Sch C with a deduction for the amount on the S-Corp. The taxpayer will pay *APPROXIMATELY* the same taxes (income & SE Tax)... but the State PR departments get screwed. I personally won't do this. My license is too important to me to take the risk for a client that could easily turn on you when the IRS comes knocking. YMMV
HumanKind... Be Both