abctax55
Level 15

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

 

 

 

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