W-2's Filing

[ChiHoang]

I have  a client who purchased a business on 5/1/2021. She used the same EIN and LLC of the old owner.

Should the old owner and she (new owner) file SEPARATE W-2 for their employees under the same EIN and LLC but different owner name ?

Thanks for your prompt response.

Chi Hoang  

[sjrcpa]

If your client bought the LLC, your client is responsible for all tax filings for the year, including W-2s and 1099s. (Although the purchase agreement could have specified some specific things.)

If your client only bought assets, they screwed up by using the LLC's name and EIN.

[ChiHoang]

Do you mean that even though my client purchased the business on 5/1/2021, she has to file all her taxes (940, W-2, schedule C) as if she owned the business on 1/1/2021 when she used the same LLC and EIN ? 

Thanks for your response

[sjrcpa]

Did she buy the LLC?

Or did she buy the assets of a business?

Either way, her Schedule C reports only the business activity for the period of time she is the owner.

But if she bought the LLC, the 1099s and W-2s and 940 are reported for the entire year and she is now the person responsible for filing them.

[ChiHoang]

She bought the assets and the customers, not the LLC. But she uses the old owner's LLC and EIN. I will change the sole member to her on the LLC.

My question is if she should file 940, W-2 and schedule C for herself starting 5/1/2021 when she bought the business (assets and customers). 

Thanks for your response

[BobKamman]

If she didn't buy the LLC, what gives you the authority to change its sole member?  That's a matter involving state law and just because she doesn't want to hire a lawyer doesn't mean you should help her botch things up even worse.

Get her a new EIN, now, and file payroll and income tax returns with it from now on.  You've already filed some quarterlies with the previous owner's number?  Well, that was a serious mistake.  I'm sure by this time next year you will have it sorted out.  

[ChiHoang]

Ok, I'll get her a new EIN for 2022.

But for 2021, Should I prepare 940, W-2 to cover the period starting 5/1/2021 when she bought the business ?

Thanks

[sjrcpa]

And since she didn't buy the LLC, what gave her the authority to use the LLC name and EIN for payroll?

Off hand I don't know how you fix this mess. Good luck.

[IRonMaN]

Just out of curiosity, what did the 941 show for the second quarter?  The old owner and the new owner employee wages combined or did they each file their own 941s for the respective months? 

[dkh]

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@sjrcpa wrote:

And since she didn't buy the LLC, what gave her the authority to use the LLC name and EIN for payroll?

---

Probably someone on social media told them it was ok.......

[qbteachmt]

If your client bought a Business, but not the LLC operating it, this means all of the employees are new hires as of that cutover date. All YTD info for the employees and the employer taxes would start at 0. And this person would need to contact State agencies to become what is called a Successor Employer, to take advantage of any continuation breaks, such as if there is a worker comp rate that is better for the ongoing company that for New Employers, and the SUTA might have a provision for Successor Employer.

It's unfortunate that this is just now coming to light, because there are a lot of provisions that would not carry over to that new entity, just because it hired the same people that were working under the old employer. It's hard to know how many of the provisions were utilized, of course, and who is now responsible for addressing the issues. That can even include benefit plans.

I recommend legal counsel on this, because the old employer/owner should be brought into this discussion, too.

[ChiHoang]

Form 941 for the 2nd quarter was prepared for the period 4/1/2021-6/30/2021 including payroll under the old and new owner.

Thank you for all your responses. But no one answered straight to the question if I should file separately 940 and W-2's for new owner starting 5/1/2021 and one for the period 1/1/2021 - 4/30/2021 under the old owner or just file one 940 and W-2's for the whole year.

[IRonMaN]

Each owner should be filing for the periods that they owned the business.

[qbteachmt]

"But no one answered straight to the question if I should file separately 940 and W-2's for new owner starting 5/1/2021 and one for the period 1/1/2021 - 4/30/2021 under the old owner or just file one 940 and W-2's for the whole year."

Yes, everyone pointed out there is no carryover.

You cannot file W2 without a different EIN, and you cannot use the same EIN for the whole year, for all of this is a mess.

The 940 is an Annual form, for wages taxed only up to the first $7k, and now you have Two businesses to contend with, as the new owner started with Payroll in May at $0 YTD. The old owner is the 940 up to the final paydate under that person's ownership.

This topic is dead, because the picture is horrible.

[qbteachmt]

I remembered we answered a payroll question last time, under a ProSeries topic:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/employee-retention-cred...

Regarding ERC, that is an example of something in 2021 that is further complicated by this mess, if that was the same business and the same "two different owners, not the same LLC, but the same EIN" problem.

There is too much to straighten out here, for anything to be filed right now. And ProSeries has none of these tools.

Whichever payroll tools you are using, you should be getting outside help to first fix this mess. Then, to execute those fixes, you use the Payroll tools, not ProSeries.

You seem to be in the wrong place on the internet, because you keep asking about Payroll.