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Complicated S-Corp Question

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gottalovelaw

Junior Member
What is the name of your state (only U.S. law)? Nevada

I am hoping someone here with a solid knowledge of taxes and the law can help.

#1 - If someone was paid (contractor) corp-to-corp (no taxes taken out, not even employee, medicare, etc.) to their TAX ID from three years back, but the person never reported it as income (and never filed any taxes for those years), what should they do? They applied for an EIN, but they never filled out any other paperwork with the IRS or any state entity or otherwise declaring the tax ID to correspond with an actual business, etc. So basically the company paid the contractor maybe $100k give or take without taking out any taxes. The individual did not report those as income, but then again, the individual did not file any returns at all for those two years. Even though the company paid the individual referencing his/her tax ID and business name, this business does not exist.

#2 - The IRS has not contacted the individual. Why is this? Is this an oversite, or perhaps did the person who paid the money enter an incorrect TAX ID, or since the person never did anything with the TAX ID (e.g., form a business), does the IRS no have record of it?

#3 - How does this person go forward? Do they have to form a business entity in order to file these taxes (because certainly they don't want to let this slide or not report it). Can they just file as an individual and not a business, pay the taxes and penalties? How would they do this since no W2s were issued?

Does this person need a CPA or an attorney or both? If they were to call the IRS, wouldn't this flag their issue?
 
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tranquility

Senior Member
A person who has $100K in income which he did not report although there is a 1099 out there with his tax ID, needs to see a tax attorney with experience in criminal matters. The fact it was a corporate entity will not protect the responsible party. If the returns are filed and the tax paid before the IRS goes looking, they may not prosecute, but with that amount there is still risk. The usual advice here to see another professional to see your actual liability first, but the amount is so large here so as to really be a problem and the attorney-client privilege may be important.
 
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LdiJ

Senior Member
What is the name of your state (only U.S. law)? Nevada

I am hoping someone here with a solid knowledge of taxes and the law can help.

#1 - If someone was paid (contractor) corp-to-corp (no taxes taken out, not even employee, medicare, etc.) to their TAX ID from three years back, but the person never reported it as income (and never filed any taxes for those years), what should they do? They applied for an EIN, but they never filled out any other paperwork with the IRS or any state entity or otherwise declaring the tax ID to correspond with an actual business, etc. So basically the company paid the contractor maybe $100k give or take without taking out any taxes. The individual did not report those as income, but then again, the individual did not file any returns at all for those two years. Even though the company paid the individual referencing his/her tax ID and business name, this business does not exist.

#2 - The IRS has not contacted the individual. Why is this? Is this an oversite, or perhaps did the person who paid the money enter an incorrect TAX ID, or since the person never did anything with the TAX ID (e.g., form a business), does the IRS no have record of it?

#3 - How does this person go forward? Do they have to form a business entity in order to file these taxes (because certainly they don't want to let this slide or not report it). Can they just file as an individual and not a business, pay the taxes and penalties? How would they do this since no W2s were issued?

Does this person need a CPA or an attorney or both? If they were to call the IRS, wouldn't this flag their issue?
I agree with Tranq, but I am going to answer some of your other questions. If you never set up a business entity, then you would simply be a self employed individual who obtained an EIN for the business. The business name would be a DBA.

Its odd that the IRS hasn't contacted you, but if you have moved that might explain it.
 

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