S-corp Owner Pay

[Ledo1611]

I set up a new S-corp in 2019, my previous accountant messed up a lot of things, I'm the sole owner/employee but he didn't add me on a payroll, didn't make estimated payments or file proper paperwork. Now I would like to reconcile this mess. Regarding owner compensation; I didn't receive a W-2 salary for 2019, so I would like to fix that and split the net profits between a "salary" to pay proper SE tax on that amount, and a K1 distribution. Another accountant suggested I put that "salary" amount as an officer compensation in the 1020s and report it on my personal return as "other income" so it gets taxed properly as if I received a 2019 salary. Would that work, or there is a better way to reconciling this?

[tagteam · Accepted solution]

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@Ledo1611 wrote:

....Another accountant suggested I put that "salary" amount as an officer compensation in the 1020s...

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You need to engage another accountant (i.e., a tax professional) who is experienced in the matter with which you are dealing. Reporting the amount incorrectly, and knowingly so, as salary on the 1120-S would essentially be tantamount to fraud. 

Please consult with an experienced tax professional and, preferably, have your 1120-S professionally prepared.

[Critter]

I don't know where you are finding these "accountants" but the one who suggested entering it as other income on the personal return should be drawn and quartered.  You really need to find qualified assistance who understand S-Corp returns well and can help you set up a proper payroll on a timely basis and educate you on the filing requirements for all  fed/state/local/sales and payroll taxes. 

[AmeliesUncle]

I agree with the others, you need to go to a tax professional that deals with corporations.

In answer to your question, to 'fix' the situation, the paperwork needs to be filed.  W-2, quarterly employer forms, unemployment, etc.  Plus all of the late penalties.

[Critter]

On top of the payroll issues ... the 1120S was due 3/15 so if the return is not on extension you will also have late filing penalties to deal with ... seek professional assistance for guidance.