| I am helping out a friend who has himself in a tight spot. He set up a company in 2007 and formed an 1120S. He never created company minutes, opened a bank account, issued payroll. He also never filed and 1120S tax return, but reported all the activity (mostly losses) on schedule c of his personal tax return. For what I have found, he should amend all personal returns and file 1120S for each year, but he would be hit with HUGE failure to file penalties. I want to help get him back on track, but am unsure of how he should proceed. ========>>He needs to file 1120S as an S corp owner/Employee NOT a Sch C that is for a sole proprietorship/one member SMLCC.so he needs to amend his 1120S.
Just as an additional FYI he has not received any correspondence from the IRS asking where his tax returns are?===========>>Basically he needs to file all those s corp returns eve if the IRS is not asking where his tax returns are; Corps(except foreign corps at a loss) must file tax returns every year, regardless of revenue, profit or loss. You file Form 1120-S, same as always ; he is probably still required to pay his state's minimum taxes, which are deductible on the federal return. This in turn can create a decuctible loss on his 1040. So a corp must file a tax return, and the penalties for not filing can be substantial even if there is no income to report.also perhaps he spent several hundred dollars on various equipment and setup costs, but haven't had any luck with bringing in new transaction. " That sounds like business activity to me.However, he doesn’t need to pay himself a salary since he didn't have any income from the S corp. he will file a Sch K-1of 1120S with his personal tax return.
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