You've got a little quagmire here and no real good answer.
- ADP is a little rigid sometimes. In your example, you could indicate to them that some of your distribution should have been wage and they could amend the forms. However, they will probably not do that.
- Even if they amended, the taxes would be late and you would be subject to some penalties; not the end of the world.
- I do not recommend issuing yourself a 1099 as that is not the proper reporting mechanism.
- The IRS does scrutinize the S corporation arena where the company is profitable, take a distribution but does not take any wage.
- I would file your return just as it is and how everything occurred. You may or may not receive a notice. If you do, then you just respond with the same facts that you presented here; late election for S status, not sure if it would be approved, can't pay wages as an LLC, year end was over once approved retroactively AND the big final piece is that this matter was corrected for 2018. They should accept that. It may take a little work (correspondence back and forth or phone calls), but you should be ok in the end. It may need the involvement of a tax professional at some point to step in on your behalf and work through the redtape.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
