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Old 03-30-2015, 08:10 AM
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C Corp misfiled on Schedule C

We have a new client who brought to us a letter from the state requiring a state corporate tax return. The client didn't know it had not been filed. The former tax preparer filed his C Corp business on a schedule C from the inception of the corporation (about 8 years). We will file the current 2014 tax year properly as a C Corp. We will recommend that amended returns be filed for prior years. Can we amend all years? What if he doesn't want to amend returns?
FYI - We were told the prior tax return preparer is in jail.



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Old 03-31-2015, 02:35 AM
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1. We have a new client who brought to us a letter from the state requiring a state corporate tax return. The client didn't know it had not been filed. The former tax preparer filed his C Corp business on a schedule C from the inception of the corporation (about 8 years). We will file the current 2014 tax year properly as a C Corp. We will recommend that amended returns be filed for prior years. Can we amend all years? ====>of course, depending on the type of corporation, the penalties for not filing a tax return can be severe even if the corporation doesn't owe any taxes.you need to file amended returns for those Sch Cs and prior year returns for C corp returns. If the corp has not been dissolved with the State and has not filed a final returns he is required to file annual returns until this is done. Some corps may be inactive and have no income or expenses. Even if this is the case, you will need to file form 1120, plus the state returns it is incorporated in, by the filing due date. Most states do have an annual fee to pay, even if the company is inactive. This will generate an expenses for the company each year.

2.
3. you need to file Form 1040X to correct previously filed Forms 1040s based on those Sch Cs and need to file back 1120s. Forms and publications are available for filing income tax returns going back to 1980 on the IRS website.


What if he doesn't want to amend returns?
FYI - We were told the prior tax return preparer is in jail.====>>in general, unless he owes taxes, he is not penalized for filing late income tax returns but, depending on the type of corporation, the penalties for not filing a tax return can be severe even if the corporation doesn't owe any taxes. When the return is more than six months late, the minimum penalty is $135 or the tax due, whichever is smaller. In other words, if a C corp does not owe any taxes, it will not end up having to pay a fine for filing late.The statute of limitations for taxpayers to receive refunds is three years from the date the return was filed or two years from the date any tax was paid for the tax year in question.However, aslongas he owes taxes and files late returns , then he will be assessed penalties and interest from the date the return was due usually April 15ncreases of tax laibilities, he needs to file back taxes as soon as possible. So in this case, to stop The two most common penalties assessed to late returns are the Failure to File penalty and the Failure to Pay penalty. FTP penalty is one half of 1 percent of the unpaid tax for each month the tax is late, and the FTF penalty is 5 percent for each month the tax is late. The interest rate is determined quarterly and is the federal short term rate plus 3 percent.if he does not file his income tax returns after it is requested by the IRS, then it may file a return onhis behalf. The return filed by the IRS will not include any credits or deductions for which he may be eligible, thereby increasing his tax liability. If the IRS determines that he owes a balance due, he could risk collection action if he does not pay the tax in full or make payment arrangements. he can, however, file his own returns, which will replace the IRS returns.



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Old 03-31-2015, 08:42 AM
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Denise

It gets better. Looks like no one was keeping up with the annual reports. In 2010 there was a an administrative dissolution for failure to file an annual report. Then in 2012 there was a notification of revenue suspension. So if he decides not to remain incorporated, future corporate returns would not be needed, would they? Just the amended for prior years?



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Old 03-31-2015, 12:10 PM
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Originally Posted by Denise View Post
It gets better. Looks like no one was keeping up with the annual reports. In 2010 there was a an administrative dissolution for failure to file an annual report. Then in 2012 there was a notification of revenue suspension. So if he decides not to remain incorporated, future corporate returns would not be needed, would they? Just the amended for prior years?
So if he decides not to remain incorporated, future corporate returns would not be needed, would they? =========>>>>>>I guess it depedns; The main difference between an incorporated and unincorporated business is the way owners shoulder business activities. over 70 percent of U.S. businesses are owned by sole proprietors and operate successfully without incorporating. as said, every U.S. corporation that's in business to make a profit must file a tax return regardless of whether it made any money. This applies both to traditional corps and Sub S corps. Even corporations in bankruptcy proceedings must file a tax return. The IRS does not assume that if you did not file, you had no taxable income. However, if you decide not to remain incorporated, then, you, as owners of unincorporated businesses, can use business losses, nol, to decrease their personal income. So in this case , you need to file returns to claim your NOLs.

Just the amended for prior years?======>>>>as mentioned above.



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