January 1, 2011, I purchased 50% of an S-Corporation; thereby creating a two owner S-Corp. I recently discovered that my business partner failed to separate personal expenses from the previous year’s tax returns (nonemployee children on business cell phone plan and on business fuel cards) , and allowed one employee's family (family not employed with Corporation) to obtain cell phones through the Corporation; yet claimed the entire year-to-date cost of the cell phone bill as a business expense. Please advise as to what the repercussions of his actions can bring.
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