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..........
Thanks again for using our service. Please remember to click on the green "ACCEPT" "ICON", it is the only way we get credit for our work.
Feedback and bonuses, where you feel they are warranted, are always most appreciated.