filed taxes incorrectly on an entity

Forum|Forum|6 years ago
April 17, 2020
15 replies
51 views

We filed 2019 taxes on what was a C Corp in 2018. They have since informed us that they converted their entity to a single person LLC, so they really just needed to file a Schedule C on their personal return. The C Corp for 2019 has been filed and accepted. The LLC was formed in 2019. Now what? I'm trying to research this, but not coming up with a solid answer.

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Best answer by TaxGuyBill

The best solution is to fire the client for not telling you that BEFORE you prepared the corporate return. 😁

@Jane918 wrote:
The LLC was formed in 2019.

Was it formed January 1st? If not, it seems likely that SOME of the business was done under the corporation. The client would need to sort out all of the income and expenses between the corporation and the newly formed LLC. You would then amend the 1120 to reflect the corporate income.

T

TaxGuyBillAnswer

The best solution is to fire the client for not telling you that BEFORE you prepared the corporate return. 😁

@Jane918 wrote:
The LLC was formed in 2019.

Was it formed January 1st? If not, it seems likely that SOME of the business was done under the corporation. The client would need to sort out all of the income and expenses between the corporation and the newly formed LLC. You would then amend the 1120 to reflect the corporate income.

J

Jane918Author

Level 4

Will do...thank you!

abctax55

Level 15

"They have since informed us that they converted their entity to a single person LLC"

You don't just "convert" a Corporation (C or S) to anything. The Corp is liquidated with the distribution of the assets effectively being sold at fair market value - which quite often creates a taxable gain.

And was the Corp dissolved with the appropriate state authorities.

I agree with Bill - this client should likely be fired. And I suggest getting a LARGE retainer up front, as this will be complicated to unwind. There will likely be tax consequences, which will probably p.o. the client. Clients that are p.o.'d are often reluctant to pay.

HumanKind... Be Both