Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

Single Member LLC - Owner took salary and issued himself W2

taxes---taxes
Level 3

New Client. Owner did his own books, paid himself a salary last year and issued himself a W-2. Should I have him reverse. Are there any ramifications to filing his return using W-2 and making the necessary adjustments on his Schedule C? 

Labels (1)
0 Cheers
1 Solution

Accepted Solutions
qbteachmt
Level 15

"Thought that went without saying but yes, the payments and reporting were sent."

Never take anything for granted when you find these types of errors 🙂

 

Is this the only person working in that business?

There is no way to do payroll under their SSN, so they sent in Employer taxes for their FEIN, which you need to apply to be refunded, along with the "employee's" money. The accounting expenses are wrong, too. The easiest way to handle this is to take all the entries that are payroll and change those amounts to Owner Draw. Then, when the funds come back, the owner can use it to help pay the taxes he owes. He likely wasn't making quarterly estimates and didn't know to have a plan or keep track; otherwise, this might have come up sooner.

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

View solution in original post

4 Replies 4
TaxGuyBill
Level 14

Yes, the client should correct things by reversing his own payroll.

Yes, there could be ramifications of not correcting things.

qbteachmt
Level 15

"Are there any ramifications to filing his return using W-2 and making the necessary adjustments on his Schedule C?"

Yes; it's all Wrong. What you didn't mention is if you confirmed the tax payments and the payroll reporting also got sent. It might not be all Wrong; it might only be partially Wrong.

*******************************
"Level Up" is a gaming function, not a real life function.
taxes---taxes
Level 3

Apologies. Thought that went without saying but yes, the payments and reporting were sent.

0 Cheers
qbteachmt
Level 15

"Thought that went without saying but yes, the payments and reporting were sent."

Never take anything for granted when you find these types of errors 🙂

 

Is this the only person working in that business?

There is no way to do payroll under their SSN, so they sent in Employer taxes for their FEIN, which you need to apply to be refunded, along with the "employee's" money. The accounting expenses are wrong, too. The easiest way to handle this is to take all the entries that are payroll and change those amounts to Owner Draw. Then, when the funds come back, the owner can use it to help pay the taxes he owes. He likely wasn't making quarterly estimates and didn't know to have a plan or keep track; otherwise, this might have come up sooner.

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

View solution in original post