Discussion:S- Corporation
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| 7 April 2007 | |
| I have a client who started an S-Corp in late 2005. He incurred some expenses in 2005 but no income at all. In 2006 he earned about $700.00 but his expenses was over $8,500. Where this amount should be entered in his 1040 return for 2006? Thanks for your help. | |
Bottom Line (talk|edits) said: | 7 April 2007 |
| Do the 1120S for the corp. Then enter the K-1 info on line 17 | |
| 8 April 2007 | |
| S-Corpn. do not have any income - only loss, Does it still need to file the return by March 15,2006? If so What is the penalty for not filing by March 15, 2006. Thanks for your help | |
Bottom Line (talk|edits) said: | 8 April 2007 |
| You don't say how late in 2005 the corp was started. If super-late (like last couple of weeks in December), they may not have expected a 2005 return. But they will definately expect a 2006 return. Since it sounds like a 2005 return was not filed, I'd probably capitalize the 2005 expenses as Start-up Expenses and amortize them. I've never seen a penalty for late filing of an 1120S (but someone in California said he saw a few last year). Anyway, it's too late to do an extension now. Extend the client's personal return since you probably won't be able to get this finished by 4/17. Sounds like you've never done an 1120S. Although this one will probably not be too hard (reading between the lines of the OP), get someone to look it over or help you with it. | |
| 8 April 2007 | |
| Make sure your client has an S Corp. Form 2553 had to be filed and the client should have received notification from irs (an Acceptance Letter) which would have stated the effective date of election. The client will need this letter to verify S status if ever audited. Also be aware the loss limitations as to what is considered basis for the shareholder. Contributed Capital, Stock, and certain debt is considered basis for loss. Penalties do apply for late filing, their usually assessed due to the fact the K-1s' were filed late, I think it's $50.00 for each partner up to a certain # of months. Also check your state filing requirements, it may not be too late to file an extension for the state corporate return. | |
Bottom Line (talk|edits) said: | 8 April 2007 |
| There is a work around for no acceptance letter but it's easier if you have it. I always keep a photocopy of it. I always forget about state income tax since FL doesn't have it personally and only requires it the first year for S-corps. I only do a couple of C's | |
Bottom Line (talk|edits) said: | 9 April 2007 |
| Thanks for the help. As you can see that this is the first time I am dealing with 1120S. Client has filed all the paper work to start S corp in Oct. 2005 but never filed 1120 return. He incurred expenses all the way and made around $750 2006. However his business expenses was over 7,000 from Oct. 2005 to Dec. 2006. Now he is telling me, he is not planning to continue his S corp business, since it is loosing money, just to forget the S corp and file his 1040 and claim these expenses as a business loss on his 1040. Can I do that? Also or 2007 if there is no activities at all in his S-corp, Does he still need to file 1120S? I appreciate all the help.
Retrieved from "http://www.TaxAlmanac.org/index.php/User_talk:Bottom_Line" Really can't show this on his 1040 because he set up a separate entity, ie the Scorp. IRS will be looking for a return. He really needs to file the 1120S but you can do an initial and a final in the same year. | |
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