What I mentioned is, any amount he took from the business should have been run through Payroll. You cannot take money and bypass payroll, for an S Corp. Someone is doing the work and there is supposed to be Reasonable Compensation for that. If the person thinks they have the right to Draws or Distributions, you should explain their error. Even if there is $2k Net Income, the IRS has typically looked for Payroll, if any money was taken for any non-business reason, including "because I am the shareholder."