NJ S-Corp revoked 10 years ago - dissolve it or not?
I used to run a business in NJ which was set up as an S-Corp. When I moved abroad in 2008, I told my accountant to close it down. He filed returns (federal (1120-S) and NJ) for 2008, and they were marked as "final". No other returns were filed after this.====>Just for reference, to terminate your S corp, you must file a request to dissolve with the NJ state in which the corp was incorporated. The state will verify that the corp does not owe any state taxes and send you a Certificate of Dissolution. Once you receive the state's approval, you may file your final tax return with the state/IRS. You do need to file final 1120S/Form 966 with the IRS. You also need to notify the dissolution of the Sc orp to other state jurisdictions, i.e, employment dept worker?s benefit fund assessment dept or etc to let hem know the dissolution of your S corp
I recently checked the status of the S-corp on the NJ Treasury website, and it shows that the company was actually revoked in 2007(!) for not filing annual reports for 2 consecutive years. This is very strange, because the company continued to operate until 2008, and the "final returns" for 2008 were not questioned.=====> An S corp may voluntarily revoke its election as an S-corp then it continues to operate and be taxed as a C-corp. A voluntary revocation without dissolution of the corp is effective on the date specified in the statement of revocation filed with the IRS. For the revocation to be effective for the next taxable year, the statement of revocation must be submitted to the IRS by the 15th day of the 3rd month of that taxable year. For a 2007 corporate tax year that begins on January 1, the revocation would need to be submitted by March 15, 2007, in order for it to be effective for that year. Any revocations filed after that date would be effective for the next tax year of 2008.The corporation can also specify another date. This date can be on or after the date the election revocation is filed. If no effective date is mentioned, the revocation will not become effective until the beginning of the corporation's next taxable year.
Quite frankly, I have no idea on what actually happened; however,a possible scenario that can occur very often is due to administrative mistake of NJ State governments. I guess the accountant at that time had to notify the situation to you.
However, the company was apparently never dissolved. It still has "revoked" status. My then-accountant has passed away in the meantime, so I cannot him why on earth he let this happen.=====there must be some sort of usual administrative miscommunication of NJ state or miscommunication between you and your accountant ;as you said, the company was apparently never dissolved , then it?d be revoked status, becoming a C corp. however, aslongas your acct filed final return of the S corp in 2008 then it?d be no longer revoked status then, aslongasyou want to know it, then, you need to check the records, a copy of return or etc that the accountant gave you or may contact the NJ Dept of Revenue for sure. You do not need to contact the IRS since as you said, the S corp was never dissolved. UNLESS the S corp was dissolved, the accountant did not have to file final 1120S/Form 966 with the IRS. So I guess the accountant wouldn?t have filed final 1120S/Form 966 with the IRS in 2007.
I now wonder what the potential tax implications are, and whether it makes sense to dissolve the S-corp, or to just leave it as it has been for 10 years. I have no intention of ever conducting a business in NJ again.=====>I am confused since you said,? However, the company was apparently never dissolved.?
And you also said,? He filed returns (federal (1120-S) and NJ) for 2008, and they were marked as "final".
Did the accountant file the FINAL RETURN of the S corp with NJ state and IRS in 2008 OR NOT ??????? aslongas the accountant filed final 1120S/Form 966 with the IRS and with the NJ state in 2008 you do not need to file final returns with IRS/NJ state again.. If not, I mean your accountant filed the final return but the S corp was NEVER dissolved then you MUST file amended and final 1120S/Form 966 with the IRS and NJ state(you do not need to submit form966 to NJ state)
I should say it is hard to tell you what the NJ state ?d do;What I can expect is that in this situation, the NJ state /IRS may or may not send you tax bill. Once you contact the NJ state and correct this situation, then I guess NJ state?d send you tax bills with interests or penalties unless there is a reasonable cause to waive the penalties or etc. But, NJ state/IRS Will Not Waive Penalties Without Reasonable Cause
In particular, I would like to know:
1) If I want to dissolve the S-corp, I understand that I would first have to reinstate it. Does the minimum entity tax of $500 per year continue to accrue for EVERY year until reinstatement? =====>In principle yes since it has been still an S corp as you know. but it is up to the state ; if your biz became a C corp in 2007 and 2008 before the dissolution, you need to pay taxes,interest.penalties as a C corp not as an S corp if you had taxable income as a C corp ;however as mentioned above, it depends.plz read above . As mentioned above, you need to file amended final S corp returns with NJ and IRS .plz read above.
So if I reinstate it after 30 years, do I really owe $500 for every year (plus interest)?====>and penalties also. Yes in principle unless you have reasonable cause to waive interest, excise taxes penalties. you also need topay payroll taxes and state unemployment taxes or worker's unemployment taxes or etc.
2) What are the federal tax implications? Would I have had to file 1120-S for every year since 2008, even though the S-corp was revoked?======>yes in principle aslongas it still has been an S corp ALSO. as I said aslongas you filed final 1120S/Form 966 with the IRS in 2008 then you do not need to file form 1120S since 2008.however, the IRS?d charge taxes for 2007 and 2008 up to the time when you file the final 1120S/form 966 with the IRS.
And would I owe the late-filing penalties ($195 per month!!) for all those years?==>YES however, REMEBER The IRS can terminate your S election, causing it to automatically revert to a C corp, or you may h ave revoked the S election and convert to a C corp or etc
)THEN, as said your is not S corp in 2007 but was automatically reverted a reg c corp , then, you, as a c corp, need to pay taxes and interest.penaltues once your biz generated taxable income in 2007 and 2008 before the dissolution.
3) If I just let the S-corp sit there as revoked (i.e. do nothing), will NJ eventually come after me? I would think that by now (8 years after final return was files) I would have heard from them, but maybe they're just really, really slow....?
>As mentioned above;aslongas your final return of 1120S was accepted then no. so, it depends . it is up to your NJ statehard to tell what?d happen to you what IRS/state ?d do to you. Nobody knows the answers but only IRS/NJ state. In general they?d so in principle. You need to contact an Enrolled Agent or a CPA doing taxes in your local area for professional help .
Last edited by Wnhough : 01-12-2017 at 01:27 AM.