DANRVAN

I think part of the issue is the confusion with the two types of ERC. They are similar in some ways and quite different in other ways; particularly in the manner the credits are claimed. The ERC for an inoperable business due to a designated disaster falls under sect. 38 as a general business credit and used as an offset to income tax via form 5884-A. They should have been given different names to avoid the confusion!

But OP indicated that ERC was due to a business that became inoperable resulting from a qualified disaster and therefore should be claimed on form 5884-A. In that situation, both the credit and wage deduction flow from form 5884-A to the actual income tax return; which is 1120-S in OP case. Which ERC credit are you talking about? The ERC for COVID-19 reduction of business income is reported on 941. There is also a ERC for businesses that became inoperable because of qualified disasters during the years 2018 - 2020 and continued to pay wages. After reading your post again, it appears that Paychex amended form 941 for COVID related ERC. If that is the case, then you simply amend the 1120-S (and K-1s) to reflect the reduction in wage expense. But you do not file form 8554-A, or you will be double dipping and filing an inaccurate tax return. You only use form 8554-A when a business was inoperable due to a qualified disaster. That results in an income tax credit rather than a credit applied to payroll tax deposits on form 941.

For sure!

I would not attach anything unless it is required. Is that what you are doing in the above statement? Depends on the facts and circumstances. But with all the ERC abuse I would ask for some sort of summary. How well do you know your client, how reputable is Paychex vs some of the ERC mills that have popped up? Bottom line is you are relying on clients representations, but doesn't hurt to ask for additional information given the recent ERC abuse.

That is correct, I think of 1245 and 1250 as subsets of 1231 property. Sec 1231(b)(1) includes property "of a character which is subject to the allowance for depreciation provided in section 167, held for more than 1 year". Section 1250 applies since 1250(c) states "the term “section 1250 property” means any real property (other than section 1245 property, as defined in section 1245(a)(3)) which is or has been property of a character subject to the allowance for depreciation provided in section 167." Therefore, the undepreciated portion of the building and land are taxed as capital gains. Because of the above definitions, the rental does not need to rise to the level of a trade or business to be classified as either 1231 or 1250 property.

It is not a new form or concept, been around for as long as I can remember doing taxes; and referred to in multiple replies to the OP above.

You can e-file the previous two years when they start accepting business returns in the next week or two.

Use 2022 for periods beginning in 2022 and ending in 2023.

I think you are confused. That does not make any sense at all.

How did he find this out? I suppose he could file using those as his representations. Still lots of unanswered questions. How long has the business been closed. Was this a Sub S? Does he know if any returns were ever filed? Was he the sole shareholder? Did he take a wage? Has be been filing his personal returns? Did the Corp own any assets, and if so what happened to them? Most likely not. If he really wants to know if any any assessment have been made try calling the PPS hotline.

No, the gain from the first property is deferred to the sale of the second property. The total gain is the same, but there a possibility that the combined gain on the second sale could push the taxpayer into a higher tax bracket.

and Merry Christmas to you and all on this board!

Without knowing all the facts, I would probably let him know there it not enough information to file complete and accurate tax returns after all these years. I would be carefull how I phrase it, but after 10 years how likely is the IRS going to contact him now?

So to get this straight, you are trying to set up client accounts for the first time? Go to the home page but do not log in. You will see a tab to "enroll" https://www.eftps.gov/eftps/direct/EftpsHome.page I just did one few days ago.

That is correct. I am curious, are these 1120-S returns that you prepared?

You are making it way to complicated. You don't need to read past paragraph (a) titled "Deduction Allowed".

Wages are not reduced on form 941, just the employer's deposit liability by the credit. That is true to prevent a double benefit.

Incorrect. Suggest you review sect 172(a).

Maybe some confusion in how I am reading your statement; but I think you are referring to the year of loss and carryforward computation. In the year of deduction the limitation is taxable income (with 80% rule) without regards to section 199A.

We also have a lawyer on our finance committee that offers help with those types of issues.

Oh, that changes my answer. per: https://www.irs.gov/charities-non-profits/churches-integrated-auxiliaries-and-conventions-or-associations-of-churches "Churches (including integrated auxiliaries and conventions or associations of churches) that meet the requirements of section 501(c)(3) of the Internal Revenue Code are automatically considered tax exempt and are not required to apply for and obtain recognition of exempt status from the IRS." So now what is the next step? If this was my local parish, I would furnish the above information to the investment group. If that did not work, I would ask the CFO of our Diocese for help in resolving the matter.

Out of curiosity, auxiliary to what type of organization? It looks like they will need to apply for tax exemption.

Have you tried the IRS TEO search? https://apps.irs.gov/app/eos/

Now I am convinced it was made up as well, after I have beat it up trying to figure out how sec 6694 could apply!

In OP situation there is zero liability or understatement on the 1120-S; even though the preparer of the return is subject to 6694 per Rev Proc 2009-11, (which also includes form 1065). As I explained in a post above, in order for 6694 to apply in this case, it would come from an understatement of the shareholder's income tax liability. For example if a sole shareholder claimed a $50,000 tax free distribution instead of a wage, the understatement of liability would end up on his form 1040. If in fact that is the case, the 6694 penalty would be avoided by using a 1099-NEC (right or wrong) to avoid the 6694 penalty as I also mentioned.