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S-Corp election (super late)


ILLMAS
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16 hours ago, Lion EA said:

Has it been operating as an S-corporation since 2016? No Payroll? No Forms W-9? They issued a W-9 and received a 1099 Did everything except file the election? Operated more like a sole proprietor Thought lawyer filed it?  No, a buddy did the paperwork  What?  TP is okay filing as a disregarded entity since if it's too late, I more or less calculated the penalty for the K-1's and it will be probably more then the SE tax if the penalty is not waived. 

 

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It sounds more like a hobby than a business.

Why would you want to draw attention to it by filing an S-election now, hoping to make it retroactive?

Why does the company want to be an S-corporation?

It's going to cost them a bundle to have you do their past bookkeeping, payroll, financial statements, personal returns, etc. I hope you have a huge retainer. Can they afford you? Can they afford all the P&I?

If they came to me and insisted on a much-too-late S-election, I'd send them elsewhere!

If they came to me to make a fresh start, I'd work with them to treat their casual hobby/business like a real business. I would not rewrite their history.

Depending on their income and long-term plans (do they want to take in a new shareholder, for instance?) I might suggest an S-election for 2023, after I've seen them make the changes I'd require.

If you have time to redo 2022, you might make a late election for 2022.

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6 hours ago, ILLMAS said:

Business has no books, business bank account is intermingled with personal expenses and I can go on and on and no personal tax return has been filed for over 5 years. 

Would you recommend just making the election for 2021 and reporting prior years on Sch C?

I agree with Lion.

You have no idea if this taxpayer would benefit from becoming an S-Corp.  Most likely not if business and personal account is  intermingled. 

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