In response to the IRS links:
To correct the W-2 you can use BSO to create, save, print, and submit Forms W-2c, Corrected Wage and Tax Statement, online for the current year as well as for prior years. After logging in to BSO, navigate to the Electronic Wage Reporting
home page and click on the “Forms W-2c/W-3c Online” tab
Question 2: Is there any tax liability on this final "distribution"? Not taking into account income for the year which there was none, what would be the answer and/or how I can figure it out?
Answer 2: Whether or not the distribution, which is a return of your invested capital, is or is not taxable to you depends on if there has been a return previously of the basis in the stock. Only to the extent that the total distributions over the life of your ownership exceeds the amount invested (less the losses and plus the income reported as subject to tax and other adjustments
) is there a capital gain
But, if properly done, at first, for the year of the dissolution of the corporation there should have been reported by the owner a capital gain or loss on the individual return to reflect the final distribution from the corporation as compared to the basis in the stock. In that case an adjustment would need to be made to the gain or loss if another distribution is being recorded. If not properly done at first, please consider professional assistance.
Question 1: What is the IRS ruling and/or cases I can see online in similar cases?
Answer 1: Of course, IRS action is private and no case can be seen by us
If you are looking for the code sections, regulations
or examples of court cases check the footnotes to the article at http://mcgladrey.com/pdf/s-corp_reasonable_compensation.pdf
Joseph Radtke v. U.S is at http://law
v. U.S. is at http://law.justia.com/cases/federal/appellate-courts/F2/918/90/24342/
Please continue to ask if you need more clarification.