The client is in the service business and do not need to pay State Sales Tax, and doesn't have State Tax ID, How can I bypass State ID In Proconnect ?

[TaxGuyBill]

Where is it asking for the State ID?  Is this a Corporation or Partnership that needs to file a state return?

The more details you can provide about the situation and what the program is saying, the more likely somebody can help you.

[Bob62]

It is in critical diagnosis to enter State tax ID, the client has S Corp and needs to file 1120-s

[TaxGuyBill]

Is it filing a State return as well?  I don't know about your state, but my state requires a corporation to have a state EIN in order to file a state corporate return.

[qbteachmt]

Sales tax is only one thing they might be subject to; you would also have Payroll for the State, so they are a registered employer in that State and would have been issued whatever is issued. Perhaps they just didn't recognize this is what is being asked for.

[Bob62]

No Payroll or Sales Tax, His total Service Income is less than 20K  NOI is less than 2K

I think I have checked the wrong box In the software finally I entered max eight-digit and e-file 

got accepted both FED and State.

Thanks for the reply I really appreciate it.

Thanks

[qbteachmt · Accepted solution]

This is not correct: "No Payroll"

S Corp is required to have payroll. Any shareholder who also works for that Corporation in its business is an Employee. The IRS specifically looks for that error and the entity runs the risk that all takings by this person will be recharacterized as Payroll, and they will be late with payroll, incurring penalty and interest, because this scenario is called "trying to avoid payroll taxes" and is not legal.

You have a bigger problem, my friend.

[Bob62]

Yes, State Return has to be a file, But This S Corporation is in a service business that has no Sales Tax to Pay and Didn't apply for State Tax ID. He came to me at the filing deadline.

Thanks

[qbteachmt]

What I mentioned is, any amount he took from the business should have been run through Payroll. You cannot take money and bypass payroll, for an S Corp. Someone is doing the work and there is supposed to be Reasonable Compensation for that. If the person thinks they have the right to Draws or Distributions, you should explain their error. Even if there is $2k Net Income, the IRS has typically looked for Payroll, if any money was taken for any non-business reason, including "because I am the shareholder."

[TaxGuyBill]

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@Bob62 wrote:

Yes, State Return has to be a file, But This S Corporation is in a service business that has no Sales Tax to Pay and Didn't apply for State Tax ID.

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Sales tax is not the only reason why the state may require a state ID.  It could be required to file the state corporate return, and if so, the corporation needs to apply for a state ID.

[Bob62]

He has not paid himself, He gave me all expenses there is no payroll expense or 1099-NEC First he firmed LLC, and then he did S Corporation election whatever NOI he has he got K-1, still he has a Problem?

[Bob62]

In this case what I should Do? file an amended return and advise him to get a state tax ID?

I really appreciate your guidance.

Thanks

[qbteachmt]

"or 1099-NEC"

You never get a 1099-NEC from your own entity.

"First he firmed LLC, and then he did S Corporation election"

Someone gave him this guidance, and they should have told him about all the requirements. That includes payroll. LLC is a State entity construct. For purposes of the Feds, he is running a corporation, and the corporation is a separate entity from himself as an individual. Think of it as: The Corporation hired him to do the work, and he is the corporation's employee.

"whatever NOI he has he got K-1, still he has a Problem?"

He needs more guidance than we can give you to give him over the internet. You both would be able to learn from mentoring. We all started somewhere.