1120S to Sch C

[ILLMAS]

I have TP that recieved a letter from the IRS letting him know they accepted his "S" status however that he needs to draw a salary. 2011 went by and he never drawed a salary but withdrew money as if he was self-employed. Now my question is would it be safe to file a zero and final return for the 1120S and report all the income and expenses on Sch C, using the name of the corp and FEIN assigned to the 1120S?

Thanks

MAS

[OldJack]

Would it be all right if I reported zero income on my return and put my income on your tax return?

If the S-corp had transactions in its name how could you ignore those?

[ILLMAS]

True, I just feel uneasy the way the account was handled, hardly any checks were written from the account and everything was paid with cash.

[Lion EA]

You can decline the engagement. Offer to put the company on extension while he searches for a new preparer.

[OldJack]

hardly any checks were written from the account and everything was paid with cash.

It would only have to have 1 check or 1 cash associated with the corp to require a 1120S reporting. Actually the corp has to show liquidating transactions in order to file a final return and those would have to have been dated in the final calender year. Maybe there is a good reason not to pay a salary.

[Randall]

A lot of people just don't understand what a corp or LLC is about. They are separate entities. Sometimes it seems absurd to file more returns and such, but they should realize what their form of business is and how it is to be reported. If they want to change it, do the proper procedures for dissolving the entity, etc. But until then, you have to file the proper forms.

[the boss]

There is a popular restaurant in town where all of the transactions are handled in cash, no credit cards. They must have a hard time finding a someone to prepare their return, right? :-).

[OldJack]

handled in cash, no credit cards.

Not uncommon for many business such as bars, some gas stations, chiropractors, barber shops, and etc. The IRS doesn't like it but that is their problem.

[ILLMAS]

There is a popular restaurant in town where all of the transactions are handled in cash, no credit cards. They must have a hard time finding a someone to prepare their return, right? :-).

Receiving payments in cash is not a problem, but using cash to pay for stuff is a bigger problem, there might be a lack of controls, where as a using a checking account. But having receipts for your cash purchases helps One might think that a business that only accepts cash might be under reporting sales, but a lot do that to avoid having to pay credit card processing fees, which is a fee that is not tack on to the customer.

[jainen]

>>would it be safe to file a zero and final return for the 1120S and report all the income and expenses on Sch C<<

Not safe for YOU. Who's going to get blamed when someone sues him personally because he didn't operate his corporation as a separate entity? File the corporation return with no salary, since that is what really happened. If the IRS dings him for payroll taxes or something, that's not your problem--he was warned.