SubS/ Form 941 Payroll

[Kurly]

TP works for a plumber as a full time employee. TP has a one person SubS doing minor plumbing jobs on the side away from and with the knowledge of his employer. Tax year 2007 Gross Receipts of $14,054, Ordinary Business Income of $-270. He did not file Qtrly Form 941, he never paid himself and did not have an employees. Should he have filed the Form 941? If so what will be the consequences of not doing so?

Thanks

Kurly

[sea-tax]

Kurly,

If he paid no wages then 941 and 940 reports as well as w-2's would not be required. However I don't think that is what you are asking. I think you meant does he have to take officer compensation when he had a loss? The answer is a little more complicated.

Did he take distributions from the S-corp?
If so how much?

If he had a loss or a profit and took no distributions then no wages would be required.
If he took distributions whether profit or loss was the net result wages should have been paid first. This is my interpretation of officer compensation. So if he took distributions I would file the 4th quarter 941 for the amount of distributions and issue the W-2's and amend any personal returns to reflect this as well as have the client pay any late penalties.