Discussion:C-Corp Super-Flubber
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Discussion Forum Index --> Tax Questions --> C-Corp Super-Flubber
| 18 September 2006 | |
| Client incorporated, never filed 2553. Never opened checking account for corporation. Cashed all checks at a check cashing center. Has hardly any receipts to show expenses. Has three shareholders - 60%, 20% and 20%. Must retain corp status for workers compensation laws.
Best thing I could come up with is to contribute vehicles to corporation for sec. 179, then consider any net income as dividends. Any ideas? Thanks Jeff | |
Chautauqua (talk|edits) said: | 18 September 2006 |
| I would kiss this client goodbye..... | |
Death&Taxes (talk|edits) said: | 18 September 2006 |
| Workman's Comp or liability insurance? I have heard of trucking firms that 'make' their independent operators incorporate and produce certificates of insurance so the trucking companies may save that cost. I am wondering if this is a like situation. My rhetorical question would be will IRS even recognize the corporation as a taxable entity? | |
| 18 September 2006 | |
| What!!!! "Contribute the cars to the corp and take 179 and consider the income dividends?" for a C corp? Unbelievable you've got more issues and questions than one can address never mind the insurance. Kiss the client twice goodbye and get some help from a nearby seasoned practitioner. Sorry to be so harsh. bye | |
| September 18, 2006 | |
| LOL. I was waiting for that after all the sec.179 discussion the past two weeks....! | |
| 18 September 2006 | |
| I'd hate to kick them out on the street. They did not intend any fraud, just did not know any better. I was looking really what to do when three people cash their corporate checks... just consider it payroll?
Thanks Jeff | |
| September 18, 2006 | |
| Well, I'll run against the grain here. I'd reconstruct the sales revenue as best I could, create expenses from oral testimony of the owners, and then, yes, create PR for the cash they've taken. Then teach them to deposit those checks in the future, etc. Hard to imagine getting checks made out to the corp cashed. Not supposed to be able to do that... | |
| 18 September 2006 | |
| I just talked to a very "seasoned" CPA. He said to 1099 them for their shares and file zero returns. | |
| September 18, 2006 | |
| Lay your money down and spin the wheel. . .you might be able to make a case for that...but who's 1099'ing them? The corp? If it's their corp, then you already establish that it existed, might as well do it right. And get the 2553 in for next go round, assuming you don't end up with a loss after expenses. IF you go the other route, suppose IRS challenges it, you never filed the initial return, etc. And you then are going to take the expenses on the personals...which would then be non-deductible for corp shareholders...icky at best. Not for me. I like shortcuts as much as the next guy, but when that wheel just MIGHT come up 00, you've got to stop and assess that risk. | |
| 18 September 2006 | |
| I'll still file the 1120 for 2005, just make it cash in/out. They have a checking account and activity for 2006 and I can file the 2553 for 2007.
Don't you think there would be more risk trying to recreate everything? They will still have to pay self-employment tax. | |
| 18 September 2006 | |
| The client that tells you that they did things without any knowledge you know for sure that they are lying. NO EXCUSES if they get audited. They knew exactly what should be done and that was to hire a professional to do their books and advised them instead of to do what they did.
Anyway, if you really want to help them you can still file the S- election with a letter and most of the time you 'll get the S Status. Then advised them that you will run the show ( for the accounting and tax aspect of their business ) to prevent any non sense in the future. And as mentioned to other discussion have them sign an engagement letter for the services that you are about to provide. Save yourself while you are in time or just take the above advise - Drop them and run. | |
| September 18, 2006 | |
| I think honest re-creations are ok, and have never had one challenged. Usually not even audited. It'll be initial filing for the corp, why audit? If they'd had a fire or flood, would it be any difference? You do the best you can. You're not auditing, merely preparing the return as best you can. To dismiss taxpayer info does them a disservice...only you can decide what you're comfortable with. But if they seem otherwise straight up folks that you want to help get in order...do the best you can for them, not the gov. | |
| 18 September 2006 | |
| I called the IRS practioner hotline - they are for the recreation & W-2s for all cash paid out. Still a zero return, just not 1099.
Thanks | |
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