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Discussion Forum Index --> Advanced Tax Questions --> S corp not maintained as s corp
Discussion Forum Index --> Tax Questions --> S corp not maintained as s corp
Sallinger (talk|edits) said:
| 17 May 2008
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| I am a tax preparer with a doozie of a new client - he is a residential construction builder, does one house per year if that. Had always run his not-very-profitable business under a sched C until 2002, when a CPA told him he had to incorporate and did the LLC "check the box" election as an s corp. He filed once that way ($2000 profit that year) and has not filed since.... at all. He has not maintained his filing status as a corp with the state of colorado, has not capitalized the company, not paid himself an officer salary. He basically breaks even (if that) and has had two years with no construction activity at all. Can I make an argument that while he held himself out as a corporation, he never acted as one, and thus file his missing returns under a sched C? Help!
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Marcilio (talk|edits) said:
| 17 May 2008
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| I doubt that he is classified as a corporation. Checking the box on Form 8832 does not make him one. You have to follow state rules for corporation governance. I don't see any problem at all in having him use a Sch C.
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Sallinger (talk|edits) said:
| 17 May 2008
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| Thanks for your swift reply -- the kicker is that he did file as a corporation with the state for one year, but then failed to do so after that. His cpa in 2002 filed an 1120s for him for that year, but he was sched. C every year before that. Did his failure to follow state rules for corporate governance after 2002 negate his s corp status? Thanks!
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Marcilio (talk|edits) said:
| 17 May 2008
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| I don't think he was ever a corporation. I practical terms, I don't think IRS or the state is going to be interested in pursuing that. I'd just file as a Schedule C & make it go away.
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Marcilio (talk|edits) said:
| 17 May 2008
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| I'm curious, does he file annual reports for the LLC with the state SOS?
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Sallinger (talk|edits) said:
| 17 May 2008
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| Wonderful - that's exactly what I was hoping I could do. It would simplify my life a great deal! He has losses or break evens every year he was in business (is now preparing to file bankruptcy) so I don't think SE taxes from the past will be an issue either. I'm inclined to just file all the missing years at once and hope they (irs) are happy. Thanks again, marcilio!
jan
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Sallinger (talk|edits) said:
| 17 May 2008
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| He may have filed one annual report the in 2002, but has not since then.
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Sandysea (talk|edits) said:
| 17 May 2008
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| Did he receive a confirmation from IRS that his election was valid? POA would certainly help in this instance I think. Whether or not he complied with the state requirements, he may still be a corporation if he made an election and hopefully the S election.
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Marcilio (talk|edits) said:
| 17 May 2008
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| I normally might agree, but I don't think IRS is interested in pursuing a bankrupt business. Just file the delinquent forms & be done with it.
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