1120S election

[ILLMAS]

A new TP came to see me last week, he started a C Corp in 2007 and had no activity until 2009. I was wondering if I only prepare 2009 return as an initial return and might as well make the election to be treated as an 1120S, TP has not filed his personal tax return. Your thoughts?

Thanks

[ILLMAS]

A new TP came to see me last week, he started a C Corp in 2007 and had no activity until 2009. I was wondering if I only prepare 2009 return as an initial return and might as well make the election to be treated as an 1120S, TP has not filed his personal tax return. Your thoughts?

Thanks

Anyone?

[TaxCPANY]

On the 2009 Form 1120S you can check box G that you're also applying for S corp status, attach Form 2553 "if not already filed," and, in the section of the 2553 below the officer's signature, describe a "reasonable cause" for the omission. In the case of one of my clients, I wrote: "Taxpayer's sole shareholder incorporated the entity with full intention to operate as an S coporation from date of inception, but only the state incorporation papers and federal Form SS-4 were filed at that date. Taxpayer moreover incurred no expense nor income during the year of incorporation, but only during the calendar year 2009, for which it is filing Form 1120S. The taxpayer's sole shareholder is reporting on his personal tax return all reportable items of the S corporation." Also, the entry in Box B matches that in Box E -- i.e., the election was requested to take effect upon date of incorporation.

So far, no notices have been received from either the feds or the state.

IMHO, the Service has been extremely lenient for about three years in allowing late elections of S corporation status without penalty, AS LONG AS some 'apology' is filed along with the late application.

VTY, TaxCPANY

Anyone?