Level 4

Question

Sole Proprietor Filed as S Corp

Forum|Forum|5 years ago
November 18, 2020
16 replies
40 views

This is a tough one guys and never seen anything like this. Here are the facts:

1. Doctor formed a PA with the State in 2019. An EIN was requested from the State for a Sole Proprietor.

2. Previous CPA filed an 1120-S for 2019 instead of Schedule C.

3. Tax payer paid themselves from what they thought was a corporation (because they thought they were) and all of the owner as well as employees were included in form 944.

4. State filing was done based on data in 1120-S.

After speaking with the IRS (I filed 2848), The 2019 return was rejected because the EIN was for sole Proprietor. thoughts on how to fix this mess!!

ProSeries Professional

This topic has been closed for replies.

IRonMaN

Level 15

If the return was rejected, file and/or amend his 1040 with a schedule C. File an amended state 1120S showing zeroes. Amend the payroll tax returns and W-2 if owner was shown as taking a salary.

Slava Ukraini!

S

sharpcougarAuthor

Level 4

Anyway we can change the type of EIN with the IRS given that it was an error?

sjrcpa

Level 15

"The 2019 return was rejected because the EIN was for sole Proprietor"

I'd say it was rejected because it wasn't an S Corp.

You can do what IRMN/Jeff said.

Or you can try to plead the case for a late election. Was 2019 1040 timely filed in accordance with it being an S corp?

The more I know the more I don’t know.

sjrcpa

Level 15

Errors on an EIN application are not binding.

Was an S election made by filing 2553? That is binding.

The more I know the more I don’t know.

S

sharpcougarAuthor

Level 4

S election was never made. EIN was filed with the IRS as a SP was a mistake. It was always meant for this entity to be an S corporation but list of errors took place. So how do I change the EIN to reflect a corporation? Is there a separate form?

qbteachmt

Level 15

"An EIN was requested from the State for a Sole Proprietor."

From the Feds? And separately, a State EIN?

Don't yell at us; we're volunteers

S

sharpcougarAuthor

Level 4

Sorry - EIN was filed with the IRS and NOT state. typo my part.

T

TaxGuyBill

@sharpcougar wrote:
1. Doctor formed a PA with the State in 2019.

I'm not familiar with a "PA". Does that qualify as a "domestic entity eligible to elect to be treated as a corporation"?

If not, it needs to be filed as a Sole Proprietorship.

If it does qualify (I'm guessing it does), it seems like it might qualify for a late-election for the S-corporation. They were treating it as a corporation and didn't realize the election form was not sent in. You may want to go that route.

As for the EIN, I have "heard" that you can just call the EIN office at the IRS (I think the telephone number may be on the EIN acceptance letter) and they can change it to the corporation. But you still probably won't be able to e-file 2019 (and 2020 is questionable) and will need to file by mail.

sjrcpa

Level 15

PA = Professional Association = Corporation. At least here in Maryland it does.

The more I know the more I don’t know.

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