Partner's Issued themselves W2s

[DANRVAN]

1 hour ago, mcbreck said:

They paid all their taxes via W2 withholding versus reporting it on their tax return. While it wasn't correct, they made a good faith effort to comply and I'm guessing came VERY close to the same end result.

Abatement for ignorance of the law does not apply to inaccurate return by preparer.

Late Sub S election and 1120 S covers all the bases with very little extra effort or cost.

[Lee B]

Interesting discussion. It's a balancing act between due diligence and getting the return out the door with the least amount of work possible

[DANRVAN]

31 minutes ago, cbslee said:

between due diligence and getting the return out the door with the least amount of work possible

Due diligence comes first in my book.  In this case the the only extra work is probably the form 2553 which is simple.  An initial / final 1120-S is not going to be much different than a 1065.

Sure they are a couple kids that made a mistake.  If they were my clients I might give them a $ break but not a free pass to avoid compliance.

Their actions created an entity where the members were paid wages and shared in profit and loss.  Why not report it accordingly?

[Catherine]

We had one "partnership" that put partners on payroll. Made the election to be treated as a C Corporation, and that ( a ) worked and ( b ) saved their bacon including late filing penalties, since C-corps don't send K-1s and get the individual deadline. (This may have been an April filing - long ago, don't recall, and don't recall off-hand if C-corps get extended to 10/16, either.)