---

@Marya9 wrote:

 Now in 2020 he would like to amend the 1120 return to show $400k in income and expenses of $340K.  Doing this will save him in self employment tax.

 

---

What he "likes" to do does not matter.  The tax returns need to be filed according to what was actually happening.  

If the business was actually operating as a corporation, it goes on the corporate return.  If it was operating under a non-corporation, it goes on Schedule C.  The results for taxes or penalties do not change that.

However, the tricky part could be determining how it was operating, because some actions could be one way, while other actions could be the other way.  Although state laws vary, I suspect the business name on the invoices he gave to his clients is likely a large factor.  If the payments he received was to the corporate name, it seems likely it would be ruled as it was operating as a corporation.  The IRS does not care about local licensing, so the fact his license was under his name is likely a minor point.  The IRS would look at the business operated.

Again, the results on the tax return does not matter, regardless if there is more or less tax, or if there are penalties or not.  File the returns according to how the business operated.

So yes, there will be substantial penalties and interest.