I could sure use some help/input. This is a follow-up to an earlier post I made about a liquidating a Corporation.
A new client is a Columbian immigrant. He was granted political asylum in late December, 2005 and was trained as a civil engineer in Columbia. He was unable to obtain a SS card for several months. Nobody would hire him. He was offered a short-term computer consulting situation, if he was incorporated. As such, he formed a C Corporation on 2/23/06 using an online service. He did not make a capital contribution. He opened a Corporate checking account, and deposited his $5625 of revenues. He purchased an $850 used car in the Corporation's name (I've seen the title). He purchased a computer for $628 using a credit card linked to the Corporate Account. He had drafts taken out of his Corporate account for insurance on the car. In total, withdrawals were made on the account for about $5400. He has not been able to provide cancelled checks or explanations of the nature of the withdrawals other than indicating he used the cash for both personal and business expenses.
He informed me his Corporate business ended about mid-April.
It doesn't end there. He presented a handwritten 1099-Misc indicating from a restaurant. When asked what type of subcontractor services he provided, he indicated he was a busboy in 2006, and is now a waiter. We discussed employee vs subcontractor issues, and social security WH, and tips. He seemed to be aware that the employer should be treating him as an employee, but indicated he couldn't afford to lose his job by complaining. His wife and children joined him in the US in mid-April. He provided SS cards for each. There's more...he told me both his wife & he cleaned houses for a cleaning service and they won't issue 1099's. He told me his earnings were $1760 and his wife's $997.
I decided first to look at the EIC on his personal return while I'm trying to figure out what in the world to do with his Corporate return. He also wants to liquidate the Corporation. His EIC after SE taxes will still be about $2800.
This is probably the craziest situation I've dealt with. My client's typically aren't the EIC type. I'm kinda "suspicious". But...he seems "honest". It just seems like employer's have taken advantage of him. I've seen copies of each SS card, his driver's license, and called the restaurant to verify he "worked" there as a waiter.
I could sure use some advice on this one. I'd like to help this guy, but both the Corporate return and personal return have me a little "skittish"(especially the Corporate).
Any suggestions provided would be greatly appreciated.
Post Note: Geesh! I just realized if I just take all of the expenses out of the corporation and assume the withdrawals were all personal, the increase in EIC will probably offset the Corporate tax.
A new client is a Columbian immigrant. He was granted political asylum in late December, 2005 and was trained as a civil engineer in Columbia. He was unable to obtain a SS card for several months. Nobody would hire him. He was offered a short-term computer consulting situation, if he was incorporated. As such, he formed a C Corporation on 2/23/06 using an online service. He did not make a capital contribution. He opened a Corporate checking account, and deposited his $5625 of revenues. He purchased an $850 used car in the Corporation's name (I've seen the title). He purchased a computer for $628 using a credit card linked to the Corporate Account. He had drafts taken out of his Corporate account for insurance on the car. In total, withdrawals were made on the account for about $5400. He has not been able to provide cancelled checks or explanations of the nature of the withdrawals other than indicating he used the cash for both personal and business expenses.
He informed me his Corporate business ended about mid-April.
It doesn't end there. He presented a handwritten 1099-Misc indicating from a restaurant. When asked what type of subcontractor services he provided, he indicated he was a busboy in 2006, and is now a waiter. We discussed employee vs subcontractor issues, and social security WH, and tips. He seemed to be aware that the employer should be treating him as an employee, but indicated he couldn't afford to lose his job by complaining. His wife and children joined him in the US in mid-April. He provided SS cards for each. There's more...he told me both his wife & he cleaned houses for a cleaning service and they won't issue 1099's. He told me his earnings were $1760 and his wife's $997.
I decided first to look at the EIC on his personal return while I'm trying to figure out what in the world to do with his Corporate return. He also wants to liquidate the Corporation. His EIC after SE taxes will still be about $2800.
This is probably the craziest situation I've dealt with. My client's typically aren't the EIC type. I'm kinda "suspicious". But...he seems "honest". It just seems like employer's have taken advantage of him. I've seen copies of each SS card, his driver's license, and called the restaurant to verify he "worked" there as a waiter.
I could sure use some advice on this one. I'd like to help this guy, but both the Corporate return and personal return have me a little "skittish"(especially the Corporate).
Any suggestions provided would be greatly appreciated.
Post Note: Geesh! I just realized if I just take all of the expenses out of the corporation and assume the withdrawals were all personal, the increase in EIC will probably offset the Corporate tax.
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