C/S Corp. with Calender/Fiscal Year

[TaxmannEA]

I'm more than a little confused by this one. The IRS has just informed us that they have no record of any of the 1120S returns that we have filed for a number of years. When I talked to PPS, they find that different places show us as either a C or an S corp depending on where they look. These databases also show both fiscal or calender year depending on where they look. I know for certain that the returns were filed for 2009 to present. There have been no notices received during that period in regards to our filings. I've gotten POA's for 2008 to present and IRS still can't tell me what the problem is as I need to go further back. The current owner purchased the business in 2009, so the problem must pre-date that. I'm waiting for the owner to sign another set of 2848's to allow me access further back.

  Does anyone have any idea about what could be going on here? I suspect some kind of database error. It appears that the returns were received but not processed with no notice of any problem sent. I'm beginning to think that we need a PRO to assist us in getting things straightened out. 

  By the way- all 941's and W-2's have been processed for the same corp. with no problems and the K-1's have been reported on the owner's returns for these periods. 

[ILLMAS]

Odd but believable, do you have some kind of record that the 1120S were sent out (efile or mail)?

[TaxmannEA]

The past returns were mailed by 1st class mail. Did not send certified. Illinois shows all of their returns filed for this period. We had one year where an extension was filed. That shows up on the record, but the record also is notated "return not required". 

[ILLMAS]

Did your client get a notice of non filing for these years?

[TaxmannEA]

Did your client get a notice of non filing for these years?

No.

[cred65]

When your client purchased the business in 2009 did he purchase the shares? or the business assets?  Did he form a new corp?

[Max W]

Was the S-corp election - form 2553 - timely made?

[TaxmannEA]

  From 2000 through 2009 the business was owned by a bank. From 1971 till the bank bought it, it was an S-Corp. The bank included the corp's return on their own filings for that period. As i felt that the S-Corp election was terminated by the bank's ownership, I filed the first year under the new owner as a C-Corp with the intention of electing S-Corp status for the following year. The IRS returned the C-Corp filing to us with a notice saying that they showed the business to be an S-Corp and to file on the 1120S. We complied and re-filed as an S-Corp and have done so ever since. No notices of any kind have been received during this period. Now we find that the IRS shows no record of the returns being filed. We filed an extension for 2011 which does show up on the iRS records along with a notation that no return is required. They do show all 941 and W-2 for all years. The sole shareholder's returns have included the K-1 information for all years.

  I simply don't know how to approach this to get things straightened out. IRS PPL is starting to run in circles. I just need some sage advice at this point, or at least some proof that I'm not going out of my mind.(A distinct possibility!) 

[ILLMAS]

Do you know if they were sent to Lois Lerner office?  Again, this is a very strange case, have you verified the FEIN used on the tax returns matches the 941's W-2's etc....? 

[TaxmannEA]

Yes. The numbers are the same. It seems that the returns fell into a dark hole somewhere. Maybe they were on Ms Lerner's drive?

[Max W]

Once an S-corp converts to a C-corp, it can not convert back, for at least 5 years.

 

After rereading your question, I would be almost certain that the original S-corp was not properly terminated using form 966 and that the same EIN was used for the C-corp.

[TaxmannEA]

I have finally been in contact with an agent who could sort this out. When the bank owned the corp, they filed the returns under a parent company. After the sale of stock to the present owner, we tried to file as a C-corp, but IRS directed us to file as a S-Corp. They did process the first 3 years but later deleted the filings from their records. We have been directed to write to the Entity Control Division of the IRS to have them correct their records to show that the corporation is no longer under the parent company as of 10/1/2010 and to show the current stockholder as the responsible party. We are also to request that they have processing re-process the S-Corp returns with us providing copies of any returns that they no longer have on their system. 

  I can' t even begin to visualize the problems that might occur with this process, but I guess that our only alternative is to proceed and see what happens. I'm composing the letter now. Any advise or comment would be greatly appreciated.

[ILLMAS]

If you can deal at an agent level (preferably the same agent) do it, but if they ask you to mail to the general address, this could result in late filing penalties and it will take a lot of your time to resolve it.  Are you billing your client for all this back and forth with the IRS?