Well, her problems, if any, with the IRS will be directly proportional to the amount, if any she owes to them. If she doesn't owe anything or a nominal amount, there won't be any problems at all.
The only thing is that with an S-Corp (which would have been the smart way to handle things if incorporated) is that her personal income tax returns
have either not been filed or if they have they probably need to be amended to reflect the S-Corp income or loss.
Also, there may be some annual report fees or state
income tax reporting
to file and minimum tax to pay depending upon which state the business was incorporated in and in which state it does business.
Depending upon the state, certain states will dissolve the corporation for non-payment of the corporate minimum excise
tax (sometimes after only 3 years) so she'll want to get this fixed ASAP, or things could get a lot worse.
If she's on the payroll, chances are most of the income has been taken out and she may even be entitled to individual
refunds on her personal returns
(if so, the oldest one may be gone do to the statute of limitations
on refund claims) so I'm not sure what role you have in this, but the fact that you're familiar with a P&L qualifies you in the 99th percentile, so get busy & get her into compliance
S-Corps can get tricky or the reporting can be simplified, so it might pay in the long run to get some professional help, despite her limited resources; this would be a good time to do it, ie. January, before everyone gets real busy.
Hope this helps..........
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