Options Please - Sch C owner put himself on Payroll - Best way to fix?

[BulldogTom]

Sole proprietor formed LLC (disregarded entity) this year.   Without my knowledge,  put himself on PR.   Got his papers yesterday with a W2 with him as employee and him as employer using his SS# as the EIN.

Besides slapping his hand and stopping it from happening again, is there anything I can do to fix this for 2021?  Or do I let it flow through this year as is since the net effect is the same?

Thanks

Tom
Longview, TX 

[Margaret CPA in OH]

[Lee B]

I have no idea of how you would let it flow thru?

Apply for an EIN, amend all quarterly and annual payroll reports.

Get a sizable fee in advance.

[RitaB]

I had a person for whom I prepare payroll and payroll reports open a partnership in 2019 and not tell me.  All my payroll reports had the sole proprietor's EIN.  I don't remember how it came about, but I saw the 1065, probably when I completed requirements for workers comp audit.  The top notch preparer (not sarcasm, he's very good) who did the 1065 put my payroll data on that return.  Initial and final.  Gave him a hella big bill, and a lecture, I'm sure.  I guess in anticipation of problems.  None so far.

[DANRVAN]

3 hours ago, BulldogTom said:

 Got his papers yesterday with a W2 with him as employee and him as employer using his SS# as the EIN.

Did he actually file 941, W-3...etc with his SS# and make deposits?

I don't think they would be accepted without a valid EIN.

 

[Tracy Lee]

I had this exact same situation last year.  I just put in his W2 and made sure the expenses were correct on his P & L report.  As you said, it was all a wash and he was still paying in all the appropriate social security and medicare.    Then he got the 'TALK' about why he could not do that anymore.  He listened! This year, no problems!

[Abby Normal]

Client should have noticed that the 941s were still in the name of the sole prop, unless that business name was the same for the partnership. I wouldn't amend anything because the W2s tie to the 941s, and there's no additional tax due. Might send it all in with a letter to the IRS to see if they care to fix it, but I'm guessing they're not.

And I second the method proposed by Tracy Lee, because I've done exactly that for both Sch C's and 1065's.

[BulldogTom]

The purpose of creating the LLC was not related to change of entity, it was for other business reasons.   Client is looking to sell, and the broker he is working with told him that it is easier to sell an LLC than a sole proprietorship.   So he created one.  Don't know when he did the deed.   I am still waiting for the LLC formation docs (requested 2 times) to find out what he really did.   Not sure who told him to put himself on payroll.   There is only one set of books (without any payroll expenses!).  I have requested the 941s (requested 2X).

Thanks for your responses.

Tom
Longview, TX

[Lee B]

1 hour ago, BulldogTom said:

The purpose of creating the LLC was not related to change of entity, it was for other business reasons.   Client is looking to sell, and the broker he is working with told him that it is easier to sell an LLC than a sole proprietorship.   So he created one.  Don't know when he did the deed.   I am still waiting for the LLC formation docs (requested 2 times) to find out what he really did.   Not sure who told him to put himself on payroll.   There is only one set of books (without any payroll expenses!).  I have requested the 941s (requested 2X).

Thanks for your responses.

Tom
Longview, TX

Wow, this return will definitely be a challenge!

I hope you received some money up front.

[Catherine]

4 hours ago, cbslee said:

I hope you received some money up front.

Let's make that a lot of money up front.