Un-incorporate?

[Possi]

I have a new client whose prior tax pro incorporated the spouse as an S Corp. There really was no reason for this but to bump up his fee, as far as I can tell. About $10k of income, no payroll. No quarterly payroll reports, no quarterly payments. 

My question is this, are we able to UN-incorporate her for 2019? 

I don't do 1120S returns, but my own. If I can't un-do this simply, I'll do the 1120S. I just don't WANT to. 

[Abby Normal]

You're talking about a corporate dissolution, which may not be too bad if the only asset is cash.

[Possi]

Can that be done for 2019 tax year? 

 

[Possi]

17 minutes ago, Abby Normal said:

You're talking about a corporate dissolution, which may not be too bad if the only asset is cash.

Thanks for that. I found this information. Still not sure if I can help dissolve it for 2019, so I'll probably do the 1120S.

https://www.bizfilings.com/toolkit/research-topics/running-your-business/how-to-end-your-business-business-dissolution3

[Lion EA]

Did she ever treat her business as an S-corporation? Get paid in that name? Open a corporate checking account? Use the corporate EIN? You said she didn't put herself on payroll. If she didn't act like a corporation, can she continue as a sole proprietor for 2019 and you file a zero 2019 final 1120S? I'm not sure, just throwing it out there. Still need to dissolve with her state. What do you say, Abby?

[Possi]

16 hours ago, Lion EA said:

Did she ever treat her business as an S-corporation? Get paid in that name? Open a corporate checking account? Use the corporate EIN? You said she didn't put herself on payroll. If she didn't act like a corporation, can she continue as a sole proprietor for 2019 and you file a zero 2019 final 1120S? I'm not sure, just throwing it out there. Still need to dissolve with her state. What do you say, Abby?

She is going to bring last 2 years today or tomorrow for me to see. I'll let you know more then. 

[michaelmars]

is she an S corp for asset protection purposes?

[Possi]

21 minutes ago, michaelmars said:

is she an S corp for asset protection purposes?

I don't think she is. I think she does regular office work but paid on a 1099. I think. I'll know more and post more when I get the actual paperwork. 

 

[Abby Normal]

18 hours ago, Lion EA said:

What do you say, Abby?

It's not clear whether 2019 is the first year as an S corp or if S corp returns have been filed for several years. But you're right that if she didn't get use the ein to open a bank account and hold herself out to be a corporation, then assets were never transferred into the s corp and she can file as a sole proprietor.

If an EIN was obtained and a 2553 filed, you should file a first and final 1120S with all zeroes.

[Possi]

3 hours ago, Abby Normal said:

It's not clear whether 2019 is the first year as an S corp or if S corp returns have been filed for several years. But you're right that if she didn't get use the ein to open a bank account and hold herself out to be a corporation, then assets were never transferred into the s corp and she can file as a sole proprietor.

If an EIN was obtained and a 2553 filed, you should file a first and final 1120S with all zeroes.

I'll let you know, but it is my understanding that 2019 was not the first year as an S corp. Thanks for all the input on this ... so far... ghost tax return. I'll update as soon as I can. It should be pretty simple to file a final 1120S. I'll let y'all know. 

Thanks again!

[schirallicpa]

Your state may be different but in NYS if the franchise (corporate) tax returns have not been filed, then the corp cannot be dissolved.  You might want to make sure all the state returns have been taken care of.