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JJ30114

Contributor

06/23/10 11:56am PDT
Viewed by asker 06/23/10 6:42pm PDT

How to file back 1120-S taxes for an Administratively Dissolved S-Corp

A potential new client has a small business which was organized in December 2006 in Georgia as an S-Corp. He didn't file IRS or Georgia returns for 2007, 2008, and 2009. Georgia administratively dissolved the S-Corp in May 2008. He didn't file personal returns for the same years and did NOT pay himself a salary.

Questions:
1. Should he file back s-corp returns eventhough the s-corp no longer exists?
2. Should he file s-corp returns for 2007 and 2008 (through May) and file as Schedule C from June 2008 through 2009?
3. The only assets in the business were cash and computer/office equipment. Should these be distributed at FMV? No capital gain would be recognized on his personal return from the dissolved s-corp...correct?
4. How should he and I handle the non-payment of W-2 wages?

Thanks in advance.

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6 Replies

JJ30114

Contributor

06/23/10 12:13pm PDT

The client may never have filed the 2553 and as such be a C-Corporation. How would this impact the questions?

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IRMN

Accountant Community AllStar

06/23/10 12:30pm PDT

Personally, I'm feeling real tired today so I would go the easiest of all routes ----- I would go from a potential new client to a non-client - less thinking that way.

You don't say when Georgia's dissolution was actually effective. Was if as of May 2008 or did they retroactively dissolve it? If it was dissolved as of May it sounds like you have a corporation (of some type anyway) for at least for parts of two years so a return should be filed for the periods. It sounds like the corporation was liquidated as of the date of dissolution so there should be some type of liquating distributions at market value on the date of dissolution. The nonpayment of wages shouldn't be an issue unless he took cash distributions instead of wages.

If this answers your question please click, um, ok I forgot what you are supposed to click. If this answered your question, how about just saying thanks and we will call it good.

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JJ30114

Contributor

06/23/10 12:35pm PDT

In respect to the nonpayment of wages...he did some co-mingling of funds. For instance, I believe he occasionally paid his personal mortgage and credit cards from the business account.

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taxiowa

Accountant Community AllStar

06/23/10 12:48pm PDT

The solution

It appears he forgot the reason he formed the s-corporation. He did not separate his personal life from the business. I am afraid the IRS would look at this as an entity which really did not happen. He probably never transferred assets into corporation in return for stock in a non-tax exchange. He probably never kept corporate records as required. If that is the case he would have to file c-corp with no activity for 2007 & 2008. He would then file business on Schedule C for all years as he never effectively kept a separate entity.

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IRMN

Accountant Community AllStar

06/23/10 12:51pm PDT

Now I'm getting a headache along with being tired. I think I just fired him as a new client.

If this answers your question please click, um, ok I forgot what you are supposed to click. If this answered your question, how about just saying thanks and we will call it good.

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ChuckCPA

Accountant Community AllStar

06/23/10 1:30pm PDT