corporate tax..how do I know if it is a 1120s or1120

[IRonMaN]

There is a separate homebase for each type of tax return.

[Just-Lisa-Now-]

You may want to elaborate on your question...are you asking how do you know if a corporation is an S- Corp or not?

[ljr]

not really sure what you are asking but. . .  how about ask your client are you an s-corp? and ask to see the IRS s-corp acceptance letter to make sure. At least half the clients say I'm a corp or an LLC and when you press them they don't know what they are. (and then the fact they they are running a business is another topic. . . .)

[PATAX]

Clients like that qualify for the Nikola Tesla Junior award...

[IRonMaN]

Modifying a line from our old friend Chuck ----------we all have morons on our team.

[IRonMaN]

In fairness to good clients, I should modify that one more time ------- some clients have morons for tax preparers.

[PATAX]

@IRonMaN Moron tax preparers are actually good in one way, and that is it makes us look even better... I know we are not suppose to benefit from the shortcomings of others, but sometimes that is the way it is...

[joshuabarksatlcs]

We were in a bar and seemed to run out of things to say so one of us suggested to go around and name the most amazing thing ever invented and explain why it was amazing.

So we went around and some said the space shuttle because... some said the fax machine because,.. on even said the dance pole because...

Finally it was Zeek's turn and he said, "Thermos"

Why? we asked.

Because when you put hot stuff in it, it keeps it hot, and when you put cold stuff in it, it keeps it cold.

Why would that be amazing, Zeek? we asked. 

And Zeek said:

But how does it know?

[joshuabarksatlcs]

But serious folks, Form 2553 can only be paper-filed.  The IRS was so behind that two new clients came to me saying the 1120S they tried to e-file for their new S corps were rejected because "We the IRS don't think yours is an S corp". 

After taking care of the two clients, I tried to e-file a client's new S corp (F2553 was filed in the first week of 2020), sure enough, it was rejected.  So, I had to do the same dog and pony filing.  (Basically paper-filing 1120S, pretending it was a late election under Rev Proc 2013-30, with an explanation that F2553 had been timely filed by certified mail dated Jan xx 2020.)

The 1120S was accepted and the determination letter was received by client in September 2021.

And we all lived happily thereafter.  

I don't know if the IRS is still behind in processing F2553.  Sharing this with you in case you don't know why it ain't 1120S while it should really be 1120S for a 2021 new S Corp client.   

[PATAX]

Thank you for sharing that information with us... We have given the IRS and the states a lot of slack due to covid-19... But it is time now for them to straighten up, and get everything in order... I'm not looking forward to next year with these kind of issues, and I'm sure no one else is...

[joshuabarksatlcs]

You're welcome.  That's what this forum is for, sharing info. 

The funny thing was that IRS rejected the extension e-filing for the S corps, for the very same reason.

I also had a June 30 YE exempt org that paper-filed its extension in October 2020, filed the tax return in March 2021 (before the 5/15 extended due date) and got a late-filing penalty notice in less than three weeks after the e-filing.  Three rounds of explanation letters and phone calls were made (due to the computer generated past due/collection notices.)  Finally got the penalty reversal letter in early October.... 

In any case, I'd call it amazing that the IRS is still somewhat standing after processing the three rounds of EIP payments.  That volume of work...  It's not just COVID per se.  I tried to paint the picture to the three S corp clients (and the exempt org).  I didn't really want them to incur such high fees for filing the dog and pony (rather time-consuming)1120S, but it is what it is, and I imagined if they had not paper file the 1120S on time, the $xx per-month penalty would stack up once the F2553's were processed and "approved".  I ended up not charging the exempt org for the penalty waiver letters and the calls. 

What a crazy tax season!!     

[BobKamman]

IRS and state revenue departments have been given a lot of slack, but not a lot of money.  As long as strangling them earns votes for politicians, we get what we deserve.  

[joshuabarksatlcs]

I know one too many state workers to have a disagreement or two with you, but I'd rather save the time for my daily walk and then my daily regimen of you-know-what.

[George4Tacks]

🐄💩? or regular 💩? 

[BobKamman]

Where I come from the state workers answer to political appointees, not qualified managers.  

[PATAX]

I have to agree with Bob on that one... May be same thing here it appears at the county level, and if that is any indication of the state then maybe there also... It appears that most of the people who get a County job are one of the following types of individuals or someone related to them: campaign workers, campaign donors, political hacks, relatives of politicians, friends of politicians, people who are "close" to politicians, etc... don't get me wrong, I am not complaining about anything because I am self-made and I do not need anybody for anything...

[joshuabarksatlcs]

Perhaps I was missing something.  Weren't we talking about taxes, thus IRS and (for CA) Franchise Tax Board?  How did County come into the picture?

[PATAX]

Read Bob's comment and then my opinion and then you'll have your answer.

[BobKamman]

Well, for example, in Virginia they  process income tax returns at the county level (except when instead there is a city) -- each town seemed to have its own Commissioner.  I would tell my story about the IRS Commissioner journeying across the river and introducing himself at an IRS walk-in counter -- the taxpayer service rep said something like, "We have lots of commissioners here, which one are you?"  But I think I would be repeating myself.  

And then there are all the Rust Belt states that have city and/or county income tax, in many cases filed locally.  

[bzbhomes]

yes I am asking if it is a sub corporation or general.  Where in the paperwork does it tell me?  The taxpayer does not know if he is a sub corporation.

[bzbhomes]

you are right.  Most of the time they do not know.  Do I assume if they do not have an acceptance letter then they must be a general corp?

[IRonMaN]

It doesn't.  They should have received a letter from the IRS approving an S election if it was made --------------- which the client would have lost by now.  If they don't know, I would put my money on them being a C corp.

[bzbhomes]

Thank you Ironman.  I am with you if they had the s Letter i think i would have found it so I am going with the latter.  Thank you Everyone for your input.

[IRonMaN]

You betcha!

[joshuabarksatlcs]

My take:

1.  What was the incorporation date?

2.  Was there a prior year filing?

3.  Given this is now 10/2021, if was incorporated in 2020, the filing (if S corp) would be late.  If it was C corp, perhaps a fiscal year end filing?

4.  Does the client want it to be C or S corp, or is it up to the tax preparer?  How much do tax preparers prefer working with clients who don't make informed decisions?  

5.  If it was incorporated in 2021, would Rev Proc 2013-30 be applicable for a late election?

6.  Or, a decision for an S corp election effective 1/1/2022?

7.  Is it possible that F2553 was submitted but the IRS hasn't responded?  Just because client didn't walk in with a determination letter doesn't really make it conclusive. 

8.  Who filed for the incorporation - is it possible that the filer also applied for S election?

9.  How about the corp records such as the initial or other meeting minutes?  Was S corp mentioned?

10.....

OMG, I start to sound like Bob the "The Rest of the Story" Man...

So, I digress. 

[IRonMaN]

While you are taking a breath, do you have any clients that have actually filed their own 2553?  Personally, I have never had anybody sophisticated enough to do that.  The closest I come to that is when they tell me the attorney filed it for them -------------- something that I haven't seen happen yet either.  Sounds like they are going to most likely be stuck with a C corp for this year, but there is always next year.

[joshuabarksatlcs]

Yes, yes and yes.

(I'd better provide clarification -- 

Clients filed F2553.  

Attorney filed F2553.

(In all cases with married clients, the spouses did NOT sign the election...)

Last yes was about C corp, barring the decision against the Rev Proc thingie. 

[PATAX]

@IRonMaN you hit the nail on the head Iron Man... If they do try to prepare it themselves they will invariably screw it up... Also I cannot understand if the S Corp election was filed would not that be a very important document that everyone would save? How could someone lose something like this or misplace it? Maybe I am just a nerd... I don't know....