Level 3

Solved

Does a sole proprietor (LLC) in the first year of business who will report a loss need to file a W3, and if not, why would another tax preparation practitioner advise so?

Forum|Forum|5 years ago
March 2, 2021
3 replies
28 views

No text available

ProConnect Tax

This topic has been closed for replies.

Best answer by qbteachmt

Payed $1,000 to himself.

Now he says he might have signed paperwork for an S corp, which would make sense.

Doesn't have any paperwork and can't get a return phone call.

g

A W3 is sent as a cover sheet to a W2. File a corrected W2C and W3C both showing $0. There is no payroll expense here and no payroll taxes to be paid; if anything was paid, file for a refund (such as 941X, if that was used).

For S Corp or not, you need to get info from the IRS. There would be FEIN, so find out what the IRS has on file for that FEIN.

Then, if you find S Corp status was applied for, you need to find out when it was granted and when it "starts." If it is supposed to be in 2020, then you need to do a year end payroll properly with "reasonable wage" and I imagine $1,000 is not reasonable. That also means there is no Sched C, because now, the person is employed by their corporation.

If all of this is new to you, you should find a mentor. My recommendation, if you find out there is supposed to be 1120S, is to put it on extension, because it will likely take a bit to find someone that can help at this point in March.

sjrcpa

Level 15

W-3? That's the transmittal form for W-2s.

If they have employees yes they need to file it, along with a whole bunch of other stuff.

The more I know the more I don’t know.

IRonMaN

Level 15

Questions like this always get the best of my curiosity. Did you really mean a W-3 or what form was the other preparer "making them file"?

Slava Ukraini!

H

hartzmancpe@gmaiAuthor

Level 3

Other accountant had him, sole proprietor LLC, file a $1,000 W3, after which the IRS sent him payroll tax bills to pay.

How would you handle it on the tax return?

qbteachmt

Level 15

"why would another tax preparation practitioner advise so?"

Because someone heard something that was wrong or stated wrongly, or heard it incorrectly, or (excuse me, folks...) they are a Practitioner because they are only Practicing and don't know the rules that apply.

I find the terminology helps.

A single-person LLC is a Disregarded Entity = doesn't exist outside of that Person. This is treated as if they are operating as a Sole Proprietorship and file the business info on their own 1040 using Sched C.

W3 is Payroll. It is a Summary for all W2 issued. Were there W2 issued, to anyone?

Let's review that "sole proprietor" and "single-member LLC" don't get paid through Payroll, because there is no payroll for that person.

So, do we suspect a mistake has been made, or just bad guidance given?

Don't yell at us; we're volunteers

H

hartzmancpe@gmaiAuthor

Level 3

Other accountant had him, a sole proprietor LLC in NC, file a $1,000 W3, after which the IRS sent him payroll tax bills to pay.

How would you handle it on the tax return's Schedule C?

IRonMaN

Level 15

Did he pay payroll to someone?

Slava Ukraini!

Sign up

Login with SSO

Let's get you signed in

Login with SSO