W-2 & 941 Problem

[geekgirldany]

Customer came by in January for me to go over her books to see how much of distributions should be payroll. We settled on 40,000. I marked on a paper the withholdings and told her to file these with the 941 by end of the month. She does the payroll forms herself.

So now I am working on the S-Corp & Individual returns. I called and told them about the refund they were getting. She said "oh great that will be enough to pay the tax from my husband's W-2". I was taken aback some. So I asked her some questions. Turns out she thought the tax had to be paid when the W-2s are filed to the SS Admin at the end of Feb. Although it wasn't done that way last year... Thankfully she didn't send a check with the W-2s. But she did send in her husband's W-2 showing the figures I gave her in January.

So now I'm left here wondering what to do. I assume that since this was never paid in they would not get the refund back from his W-2... correct? Or would they?

What would you guys suggest the approriate way to take care of this? File a 941C with the next 941? Also amend the W-2 so there is no Federal or State withholding showing? They still get back a refund even without his Fed/State withholdings. I didn't think there was any need for them to pay the tax just to get it right back.

Any help is appreciated.

[Bees Knees]

The penalties for paying the payroll taxes late on the 941 are much greater than late payment on a 1040. And since you say they get refunds anyway, then I don't think there is any question that you DO NOT want to have them pay through the 941, which is already late. So do a 941c and show no withholding on the corrected version.

[Matt Sova]

Agree

I agree with Bees. Redo the 941 with only SS/Med taxes and no Federal W/H and a W-2c.

[geekgirldany]

Thank you guys for responding. So I will do a 941C to attach to 941 1st Qtr 2006 which will show these adjustments as they should have been on 4th Qtr 2005 941. No Fed/State W/h. Do a W-2C to show this.

I think she can go ahead and pay the money now that should have been paid in Jan 06 through a deposit coupon instead of waiting until end of April 06 paying with the 941. This should help a little bit on the penalty for paying late right?