fonthead[at]gmail.com wrote:

- quote -

To properly answer this question, we need to know what, or
maybe, IF there was a profit for 2004? If NO profit, then
do nothing. If a profit, how much, and what would a
reasonable wage have been?

ChEAr$,
Harlan Lunsford, EA n LA
Sun 20 Mar 2005

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<fonthead[at]gmail.com> wrote

- quote -

You can, and probably should, make part of the distribution
in 2005 as payroll (and a sizeable chunk at that). I
wouldn't recommend back-tracking for 2004, as the late
filing/late payment penalties on the payroll taxes may not
be worth the effort. If the issue comes up, explain that
the CPA recommended to not take salary. Also explain (by
showing) that you fixed the problem in year 2.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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"fonthead[at]gmail.com" <fonthead[at]gmail.com> wrote:

- quote -

It's too late to do anything about 2004. Start with a
reasonable salary for 2005 and move on. If IRS comes
calling, be prepared to take the bite; however, the fact
that you got on the wagon as soon as you learned of the
mistake could give you a break.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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We formed an S-corp last year and I am the sole
shareholder/employee. A cpa gave us bad advice to not take
salary that first year and instead take it all as
distribution. Obviously the IRS wouldn't like the fact that
we aren't paying a sizeable sum of payroll taxes we would
have, had I taken a reasonable salary.

My question is two-fold: Is it possible to pre-empt the IRS
and pay what would have been my payroll taxes for 2004? I
honestly want to do what is right and honest (gasp!).

And then if that is not possible, and I was later audited,
what would the penalties and fees be if they reclassified my
distributions as salary and asked for those payroll taxes
then?

I just can't figure out what my options are. I'd really like
to undo my mistake if possible before the IRS does. Thank
you for your help in advance.

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