Preparing 1120S without all records

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    Terrence Power

    My client hired a bookkeeper who embezzled almost $400k and destroyed all the accounting records since 2016 and the QB files. We have bank statements and credit card statements but little else. I want to prepare the tax returns asap. I was thinking Cohan rule application but read those are hard to support in an audit. We can “guess” at what an income stmt and balance sheet might look like, but it’s a guess at best.

    Can I just do the best I can and disclose (8275) my assumptions? It’s impossible to go back and recreate a good set of books with just a bank statement. I also want to start with the 2019 return to avoid S corp late filing penalties so beginning balance, shareholder basis, can’t be determined.

    Also, is there a way to get copies of W2/W3 filings? We don’t even know what got filed or if anything was filed.



    James Wade


    Honestly, that’s all you can do. Rebuild as best you can, document any estimates and disclose. What’s the alternative? I suspect you will probably be very scrupulous with the paperwork so that will go a long way in assisting your client.

    As for W-2s, I’ve been able to get those for an individual. It doesn’t contain information for the state but you might be able to get what was filed for the employees W-2s/W-3s. Here is something I found that might help:

    Good luck!

    Terrence Power

    Thanks James, and for looking up that link.

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