Had a potential client stop by yesterday. She had an 1120 from 2018. She's the only owner to this corp. I asked her if she had a W-2 issued to her. She said no! All her compensation was in the form of "draws" Question now is, how do I report her draws/compensation on her personal 1040?
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Wouldn't corporate dividends paid be taxable income? Who prepared the 2018 Form 1120, why didn't they also prepare the 2018 Form 1040, and why is the taxpayer looking for a new preparer? Lots of questions about whether this is a client you want to work with, IMO.
To your more direct question, if you choose to prepare a Form 1040, I don't think your due diligence needs to include a review of the Form 1120 - prepare the return with the information provided. But if you don't have a good faith reliance that the taxpayer is giving you complete and accurate information about all gross income received during the year, they don't sign the return. The taxpayer can then go down the list to the next preparer, and simply omit telling them about any corp to avoid any further diligence efforts."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard -
That might be tough if there is a profit (or loss) she is trying to take. However, I agree with your gut feelings here.Originally posted by Rapid Robert View PostComment
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