Discussion:Substitute W-2 for 1120S Officer Comp
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Discussion Forum Index --> Basic Tax Questions --> Substitute W-2 for 1120S Officer Comp
Discussion Forum Index --> Tax Questions --> Substitute W-2 for 1120S Officer Comp
| 24 October 2009 | |
| OK, I have a new client with a problem and I would like your advice. 2008 1040 and 1120s have been filed. No Officer compensation of distrubutions taken so prior accountant made up a $9,000 Officer comp on the filed 1120s and did a Substitute W-2 for the only shareholder. The 1040 shows the unreported SS an Med tax on line 58. No 941's have been filed so the withholding has not been accounted for. I can't see this as proper just plugging in a figure not from the client to establish Officer Comp on the 1120s. The business should be Sch C as it only had $12k of nonpassive income. Advise please....I am facing several of these from the same accountant... | |
| October 25, 2009 | |
| What an.....uh...creative thinker. Yeah, I'm with you. A substitute W2 is for folks who didn't get a W2 but where one would have or was actually created! A 1099/Sch. C is a reasonable substitute in my opinion, otherwise, I think you're getting mail over the missing payroll filings. | |
| 25 October 2009 | |
| Yep I think so too. This other tax preparer is doing this on quite a few of the clients and I am trying figure out the best way to amend the current filings before my prior employer sends mailings.
Thanks... | |
| 25 October 2009 | |
| Sounds like you have some amending to do.
A 1099 is not a substitute for a W-2 emploee of an s corp. An audit can still require the s corp to pay tax on a reclassified p/r. Why should a sched c be filed if the business is properly incorporated and made the s election? | |
| 25 October 2009 | |
| TB, if you do a search on something like “S-corp” “no payroll” you’ll find a lot of support for handling this in an expedient way (e.g., the 1099 concept, loans to/from s/h, et al), and also posts pointing out that there’s right way this should have been done in the first place, and that wouldn’t involve a 1099, and so the correction shouldn’t, either. It sounds like you’re well aware of what should have been done and are open to ideas on how to fix it after the fact.
Depending on who comes by today, this discussion may well restart the never-ending debate over the “best” way to do that, but if you're interested in more viewpoints right away, take a look at some of the prior discussions – Sample search: Search “S-corp” “no payroll”. Note that the most recent discussions tend to be at the bottom of the search results list, and also that if you do a second search replacing “S-corp” with “S corp” without the hyphen (or with “S corporation”) you may find some other discussions that didn’t come up in the original search. | |
