Hello Friends,

I have a new client in a pickle.  They did not understand from their old preparer that they needed to file 941s as well as state forms for their newly declared LLC (As an S Corp).  

They also did not submit any w2s to the IRS for their salary.  

They did pay quarterlies under their SSN

I don't want to get them in a pickle and I am wanting to confirm the best path or ask for an alternative.

(1) I think we should have them file late W2s, indicating withholding.
(2) File 941s for 3rd/4thQ showing income and withholdings with late payments
(3) Report the taxes paid on the 1120 (even though paid late)
(4) Use their quarterly payments like normal on the 1040

This makes them pay now the 941s but brings them a bigger refund since they would get credit for the quarterlies.

or do I

(1) I think we should have them file late W2s, indicating nothing withheld at all.
(2) File 941s for 3rd/4thQ showing income but show no monies withheld (since that is the fact)
(3) Report no taxes paid by the business on the 1120
(4) Use their quarterly payments like normal on the 1040.

Is there a better alternative?  

It is not easy to clean up a mess and I ask for your help in the best way to do this.