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Old 05-05-2009, 08:00 PM
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Join Date: May 2009
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Newly Incorporated

I live in Florida and, last year, started doing a decent amount of freelance (1099) work aside from my payroll job. I recently Incorporated in March of this year thinking that filing my 1099 wages and payroll wages separately could help my tax situation. Well, the freelance work hasn't been as consistent this year, and I'm starting to think that by the end of the year, I'll be better off just filing that 1099 income with my personal taxes. I'm now even wondering if I just wasted the money to incorporate. I've yet to file form 2553, but was advised by the company I used to incorporate to do so. I've also yet to file any 1120 forms, as I'm pretty sure that isn't necessary until the end of my first declared tax year (although I'm not positive). Anyway, I have a few questions:

1. Like I said before, my freelance work has come to a crawl and I'm starting to think that incorporating and separating my taxes wasn't necessary. Is there anyway to cancel my Corporation all together before accruing any minimum franchise fees or having to file any annual taxes for no activity or income? If there's no way to avoid minimum franchise fees (which I believe only occur for the first year), would it be smarter to just hold on to my Corporation in case I need to utilize it in the future? Would that require filing "blank" 1120 forms every inactive year, and if so, would I be accruing any more fees during those years?

2. Let's say things pick up for me, freelance wise, and I decide to go ahead and utilize my Corporation. Would I be able to claim 1099 income from THIS calender year through my Corporation by filing form 2553 within 2 1/2 months of incorporating (to elect to become an S Corp) and declaring my incorporation date to be the first day of my first taxable year? Also, where would form 1120 fit into this scenario? Would it be filed WITH my form 2553, or filed following this year if I were to declare this my first tax year?

3. If I decide to hold on to the Corporation, but wait to start my first taxable year at the beginning of NEXT year, am I OK to file form 2553 ANY time THIS year in order to be taxed as an S Corp in my first taxable year (NEXT year in this case)? In that scenario, would I not have to file form 1120 until I filed my taxes following that first taxable year?

Essentially, I think I took some bad advice and hastily incorporated thinking it would help my tax situation. I'd hate to cancel the Corporation in fear of possibly being able to utilize it down the road, in which case I'd have to pay for the process all over again. However, I do feel like it may never be rational for me to utilize being incorporated, and that I may be better off without the stress of maintaining the necessary paperwork for a business with little to no activity or income. Especially if I would still be accruing fees during this time. I would really appreciate some advice. Thanks!



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