"the 48,000 NEC was from the one and only client."

That means they didn't submit a W9 showing their corporate status, then? But you stated it is in the name of the corporation. That didn't have to be issued a W9 at all, but now that there is, your client has what I call, "Discoverable" info on file with the IRS.

I don't see where you mentioned what happened to that $48k, or if they took distributions from the entity?

"The first year they worked for this vendor,"

You mean Customer. Vendors are the people who provide you with goods or services; they are a Vendor to that Customer of theirs. They worked for a customer and got paid by a customer.

"they filed separate schedule C's....claiming about half of the total made as income, no expenses."

Well, maybe they don't have any costs. That's possible. But a corporation should show payroll expense and employer taxes.

"First year 1120 S.  and then personal return."

It's not unusual for the client to have gotten either bad guidance, incomplete guidance, or the client just doesn't follow through.