Tax Law (Questions About Taxes)/S-corp election

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Question
Hi John,

Client formed corporation on 10/28/13. He hasn't filed any corporation tax return for 2013 or his 1040.  Would he still be eligible for the late S-corp election since he hasn't filed his personal tax returns?

Thanks,

Jeff

Answer
Jeff,

If he meets the criteria outlined below, he can make an acceptable late election.

To qualify for relief from the late filing of Form 2553, the corporation must meet all the following criteria:
1.The corporation meets the S-Corporation eligibility criteria,

2.The corporation intended to be classified as an S-Corporation as of the intended effective date of the S-Corporation election,

3. The corporation failed to qualify as an S-Corporation solely because it did not file Form 2553 in a timely manner,

4.Less than 24 months have passed since the original due date of Form 2553,

5.The corporation either has reasonable cause or inadvertently failed to file Form 2553 in a timely manner,

6. The corporation has not yet filed tax returns for the first tax year for which it intended to file as an S-Corporation, or the corporation has filed its first tax return using Form 1120S and the shareholders properly reported their share of income in a manner consistent with the corporation's intention to be an S-Corporation,

7.Form 2553 is filed not later than 6 months after the due date (without regard to extensions) of the first tax return for which the corporation intended to file as an S-Corporation, and

8.Shareholders and other taxpayers have not reported their income in a manner inconsistent with the corporation's intention to file as an S-Corporation.

If the company meets these requirements, then company should file IRS Form 2553 by writing at the very top of the form the following words: "FILED PURSUANT TO REV. PROC. 2003-43" and attach a statement indicating that the corporation either had reasonable cause (and spell out the circumstances) or inadvertently failed to file Form 2553 in a timely manner. Both Form 2553 and the attached statement must be signed by each and every single shareholder. (More information: IRS Revenue Procedure 2003-43.)

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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