Hi everyone, 

Hope you guys had a great Thanksgiving. I need some helps and guidance and hope someone can help me out.

Here is the story. My client set up a company because people advice her to, but she wasn't clear about whether it is an S corp or C corp when I talked to her. So later I found out it is an C corp when i prepared her 2020 return, and she is the sole owner and the only member of the C corp. However, her 2019 return (initial return) was filed using S corp form 1120-S.  Now she received a letter from IRS saying that her 2019 return cannot be processed, because it doesn't match.

Now i need to refile a 2019 return for her using the correct form. so i have following questions need help with..

1. so it is a basically new filing, not amending the 1120-S from 2019, since the form and entity type will be totally different. Will it count as a late filing? the IRS agent said I can attached the letter, and it should help to clarify.

2. since 2019 was filing under S-Corp, the income was flow through to individual income 1040. How does this going to get affected? Do I file the 1120 first and wait a little then file an amending 1040? or they can happen simultaneously? 

3. my client will owe tax from the correct C corp 1120 filing, but will get refund from the amending 1040 since the income from the company is not flowing to individual anymore. Does she need to pay the C Corp tax up front and wait for the refund from individual later? or there is a way to just ask IRS to apply the refund to C Corp tax, and she doesn't need to do anything from her end?

4.How does the state return(California) gonna get  affected? since there is no letter/notice received from State. Do I wait for everything from federal level is cleared then work on state returns or I can do it at the same time? 

5. I am assuming attached a letter to explain to the state authority about the situation is needed instead just sending in new/amending state returns?

PS: i called IRS, the answer i got is just filing the 1120 for C corp first. And the person i talked to had no knowledge about how the individual and state returns will get affected. So I come here to ask, and want to see a full picture and flow first instead just filing first and take one step at a time.  

Thank you very much for your time to read through this, any help and advice is much appreciated.