Wierd S Corp Situation

[erchess]

Male caller laid it out for me this way. Restaurant began operations in late 2010 and is a single owner S Corp run by the female owner. He is an unpaid VP but owns no equity in the restaurant and gets no money from it. He has a well paying full time job with a local large employer who he named. Owner is paid on a W-2 and should also get a K-1. The book keeper takes care of the payroll and sales tax reporting and the financial statements. I am wondering whether this can all fly and what questions I need to ask. I can think of "What tax filings have already been done and by whom and do you have copies and if none why none?" and "What is your relationship to the owner other than being VP of her Corp?" and "Why are you a non working VP with no ownership?".

[Mo Sheets]

S Corp

I would ask for copies of last years (2010) 1120S and the K-1. I do tax returns for several restaurants in our area and one of them is an S-Corp. A couple of items to keep in mind:

Health insurance premiums paid by the S-Corp for any shareholder who owns 2% or more should be reported in Box 14 of the W-2 (not subject to Social Security or Medicare) and is deductible on line 29 on the 1040.

The restaurant that I handle is entitled to the credit for employer social security and medicare taxes every year. This is listed on Form 8846 and flows through to the shareholders 1040 as part of the General Business Credit (reported on line 4f of Form 3800).

As far as the "UNPAID" VP, I would ask the owner (not the VP) what this person is contributing to the organization (time/money/etc.) to help you formulate additional questions. Good luck!

[ChEAr$]

I guess I don't understand the question, Ed.

Do you remember my daughter when we all met for ice cream in September year and half ago? She is vice president of my corporation, too. No salary, no duties. no problem.

[erchess]

biggest red flag to me

is that the unpaid vp seems to want to be my contact as I have not been offered even a phone number for the owner.

[ChEAr$]

is that the unpaid vp seems to want to be my contact as I have not been offered even a phone number for the owner.

I was wondering what and whose problem it is. This vice president in name only, is not the person who should be hiring someone to to tax returns for the corporation. The president herself should be the only contact.
If I'bve read this right now, you know what to do , or rather which return not to do. (grin