BobKamman
Level 15
07-22-2021
02:00 PM
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Would have been better to start a new message thread for this, rather than reviving one from two years ago. What you don't tell us is what they did with the $48K -- presumably, just paid it out to themselves?
I would inform the clients that IRS audits 1 in every 358 S Corporation returns, and let them decide how much of the distributions were reasonable compensation, based on all of the facts and circumstances. And, I would examine whether it could be reported on a 1099-NEC to them, rather than messing around with delinquent 941's. Is there really an employer/employee relationship?