A new client can to me with unpaid salary of $65K per year to be included in corporate business return. How can this be accounted for? Why or why not?

[Sidway]

s/b came not can

[Just-Lisa-Now-]

unpaid salary....if its unpaid, what do they want to include in the return?

[SID1]

Other operational expenses of up to $20K and also including rental loss of $25K.  No income reported during this period.

[Just-Lisa-Now-]

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@SID1 wrote:

Other operational expenses of up to $20K and also including rental loss of $25K.  No income reported during this period.

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@SID1 are you the same person as the one that asked the question?  What does unpaid salary mean?

Maybe you need to start at the beginning of the situation and explain what you're working on.

[qbteachmt]

"Why or why not?"

For 2020, was any payroll run at all? Because you simply stated "salary" which would be taxable wages, which means there would be payroll taxes and payroll reporting, even if there was no Takehome.

And perhaps we should point out this is July 2021.

What sort of entity is this, and why does it have a Rental Loss? Because that doesn't explain there were no funds available to create required payroll. Tax loss isn't going to prevent funds being available, in most cases.

Were there distributions (S Corp) or Dividends? Were there other employees who did get paid their payroll? Is the person who did not get paid, one of the shareholders?

More details always help.

[SID1]

No.  I understood what it meant.  I wanted to know the tax implication of recording the transactions without any business income in a client's tax return if any?

[qbteachmt]

"No. I understood what it meant."

What "what" meant? I don't even know what this refers to.

"I wanted to know the tax implication of recording the transactions without any business income in a client's tax return if any?"

What transactions would that be?

That isn't anything like what you asked. There are no "the transactions" until you participate.

We can't answer your original issue: "How can this be accounted for?" without more details, which we asked about. This is not FAQ topics or even customer support.

"Why or why not?"

This is not a Theoretical Analysis. We need details, if you want answers. It's a discussion with you and you started the topic and you would need to participate.

As was stated: "Maybe you need to start at the beginning of the situation and explain what you're working on."

[SID1]

I am working on preparing a Business Tax Return (form 1120) for a client. The past 2yrs returns will reflect $0 income but a negative expenses of unpaid salaries as indicated and some rental income loss.

Client indicated that the operation was pursed in those 2years but in the process of re-opening for business soon.  The rented space was subleased to another business who refuses to make timing rental payments due to COVID-19.

[SID1]

I have posted the story. 

[TaxGuyBill]

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@SID1 wrote:

a negative expenses of unpaid salaries

Client indicated that the operation was pursed in those 2years but in the process of re-opening for business soon.

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Unpaid salaries are not an "expense".  Can you clarify what you mean by that?

You said "operation was pursed in those 2years", but then you said "process of re-opening for business soon".

Did you mean the operation was NOT pursued in those 2 years?  Otherwise, "operation was pursued" implies the business was operating and open for the last 2 years, which contradicts the "re-opening" soon.  So if you can clarify that, it would help us to be able to help you.

[abctax55]

Isn't a "negative expense" income ???

@SID1 or @Sidway 

"Unpaid" wages don't count unless you are on the accrual basis.  And if "unpaid" wages are to a related party there is a specific time line to follow.

[qbteachmt]

"I have posted the story."

Let's review, then:

You cannot have a loss due to Unpaid Rent, for the rent value. Of course there can be operating loss for all incurred expenses. But not "rental income loss."

"The past 2yrs returns will reflect $0 income"

But covid was only the last 9 or 10 months of 2020. Not 2019 at all. Not 2018, either.

"that the operation was pursed in those 2years but in the process of re-opening for business soon"

Wasn't in business? What does "re-opening" mean?

In the US, payroll typically is treated as cash basis activity. If this entity is a cash basis entity, and there is no payroll, then there is nothing to report, unless they want to "run payroll" and pay taxes; that's because you cannot accrue unpaid Payroll Taxes, as if that is the same as Unpaid Takehome pay. Taxes have a due date based on payroll paydate. And since you stated this is a C Corp, you cannot really leave the takehome as if that is Shareholder Equity, even if you "run payroll and pay taxes."

If the shareholder has done minimal work, there is not the same kind of requirement as an S Corp for "reasonable wages" and this assumes the person took no other funds from the entity. No loan, not a dividend. No return of capital.

We don't know enough, and it isn't even clear which year(s) this is filing.

I'm going to suggest getting some local mentoring. You are obviously having trouble with the format of an internet discussion forum; it isn't the best way to have a dialog.