This is not unusual when a person is told to form an S Corp, but no one really explains to them how to operate as an S Corp. Of course she could have headed this off as soon as the first payment arrived. And she should be signing contracts as President, with the Inc info, so that someone on the other side would have thought to confirm with her, in the first place. And she should know not to deposit anything unless it is the Paycheck from the S Corp; that customer payments go to the business entity. And, she should be shown how to fill is a W9 to show the S Corp is excluded for 1099-NEC reporting. And, and, and, as usual; including making sure there is Reasonable Compensation paid to all shareholder-employees, even if that is only her, because the IRS requires this.

All the money she got directly cannot just be reported as "not mine." It is supposed to be S Corp revenue, and she takes home money via Payroll. Not freely.