You never get a 1099-Misc from your own entity, so that needs to be corrected.

An S Corp has the requirement to pay as payroll, so that needs to be corrected.

There is no Dividend for an S Corp. That is a Distribution, and taking more than their equity position means they have reportable income, not as retained earnings distribution for that overage.

Your client is doing everything wrong. If you are not familiar with how to guide them on this, I recommend bringing into the picture someone you both can learn from.