SCorp - w2 - Not issued - Quarterlies paid under SSN

[jknecht]

Hello Friends,

I have a new client in a pickle.  They did not understand from their old preparer that they needed to file 941s as well as state forms for their newly declared LLC (As an S Corp).  

They also did not submit any w2s to the IRS for their salary.  

They did pay quarterlies under their SSN

I don't want to get them in a pickle and I am wanting to confirm the best path or ask for an alternative.

(1) I think we should have them file late W2s, indicating withholding.
(2) File 941s for 3rd/4thQ showing income and withholdings with late payments
(3) Report the taxes paid on the 1120 (even though paid late)
(4) Use their quarterly payments like normal on the 1040

This makes them pay now the 941s but brings them a bigger refund since they would get credit for the quarterlies.

or do I

(1) I think we should have them file late W2s, indicating nothing withheld at all.
(2) File 941s for 3rd/4thQ showing income but show no monies withheld (since that is the fact)
(3) Report no taxes paid by the business on the 1120
(4) Use their quarterly payments like normal on the 1040.

Is there a better alternative?  

It is not easy to clean up a mess and I ask for your help in the best way to do this.

[qbteachmt · Accepted solution]

"Quarterlies" under the SSN is 1040 Estimates, not payroll.

First group:

1. Yes

2. Yes, but there is no such thing as Combining quarters. You might want to treat this as End of Year one time payroll. That means examining their "draws" (which don't exist for them) and distributions, and turn some of that back into Shareholder Payroll as Gross. That means 4th quarter is Payroll, and it is all there.

3. No; these are Personal Estimates, not Corp or 1120.

4. Yes, and that's further evidence that 3 is a No.

Second Group:

1. Only for Fed Income Tax (and their State?). You still need to address FICA for employee and employer, FUTA, WC, etc as business.

2. Nope. There either Is Payroll or isn't Payroll.

3. The Corp has FICA, FUTA, and other requirements you cannot Ignore.

4. Yes, because that is what they are.

Example: I can submit that my W4 means I have no Fed Income Tax withholding, because I pay quarterlies. I did this for over 12 years at various employers.

It's time do all all of the paperwork to register the Corp as an employer and do 2019 the right way, but it seems the paydate is 12/31/2019 only.

And now it already is March of 2020.

[jknecht]

Thank you qbteachmt.  Wanting to clean this up I think the 1X 4th Q EOY payroll will work and they live with the consequences.

I understand that their quarterlies do not cover the Business taxes.  So when they submit late 4Q as 1X...they will pay Fed and Stare properly for the Business (minus Fex Withholding).

APPRECIATE the thoughts.