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Client issued 1099misc in 2017 from his own s corp. Should have been income thru K1. How can i fix it. 2017 Personal Income tax and S corp Taxes haven't been filed

 
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13 Replies 13
IRonMaN
Level 15

Or should have it been payroll?  Did he take a reasonable wage before the "1099" payments came through?

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)

They could have issued payroll. The owner cut himself a check to take home for personal expenses.

My questions is, since its to late to correct the 1099misc, would it be wrong to zero it out on schedule C and report the income in K1?

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IRonMaN
Level 15

If he didn't take out a reasonable wage, it should be treated as payroll.  If he took a reasonable wage, it can be treated as a distribution.  In any case, it shouldn't go on a schedule C or income on a K-1.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)

Can we go back to 2017 and issue payroll? or How do we fix the situation?

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IRonMaN
Level 15

Just for my own curiosity and perspective, what are the total revenues for the business and how much was reported on the 1099?

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)
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Rev 109K

1099misc issued 65K (21 out of 65 was used to make personal expenses from business account).

 

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IRonMaN
Level 15

You have wages and a whole can of worms getting everything fixed including correcting or preparing 2017 payroll tax returns.  Ouch.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)
Just-Lisa-Now-
Level 15
Level 15

Is it too late to correct the 1099?  Is there a time limit to issue corrected income statements? 

I had someone come in with a W2C from 2016 a few weeks ago....got that amended quick so he could get his extra refund before the SOL was up!


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
dkh
Level 11

I think @Just-Lisa-Now-  is on the right track.  Correct the 1099-MISC to zero.   Was the amount on the 1099 substantial that it should be reported as wages?   I've had a S-Corp with profits so low it wasn't reasonable for shareholder to take a wage - but then they didn't take money out for personal expenses either.

Thank you everyone for your input. Greatly appreciated. Stay safe

qbteachmt
Level 15

Here's the info, then: "21 out of 65 was used to make personal expenses from business account"

As long as $44k can be shown to be reasonable wage, that is Payroll. The other is Distribution; nothing here is Income through the K1, because distributions are not Expense or Income. Nothing is 1099 info from your own S Corp.

It's not too late to fix this for 2017; it's just going to be a bit expensive.

What about 2018 and 2019?

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"Level Up" is a gaming function, not a real life function.

No accountant or preparer was hired for 18 and 19. Just acquired the client.

 

 

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qbteachmt
Level 15

I meant, what about operationally, for 2018 and 2019? Did they do payroll, etc?

You might have to fix everything for them, going forward.

Payroll and financial data.

Then, 1120S.

Then, 1040.

Amending what was wrong, or filing Late, that which is Late.

 

Seems like job security for you for a while.

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"Level Up" is a gaming function, not a real life function.
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