Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for July, 2011

The DemonRat Brigade…

Posted by taxguru on July 31, 2011

From Blog Comix

Posted in comix, Dims | Comments Off

Continuing to lead us over the cliff…

Posted by taxguru on July 30, 2011

 

 

 

 

 

From Blog Comix

 

 

Posted in comix, TaxHikes | Comments Off

All of those government employees need your money more than you do…

Posted by taxguru on July 28, 2011

From Blog Comix

Posted in Uncategorized | Comments Off

A possible solution for Social Security?

Posted by taxguru on July 27, 2011

It’s practically impossible nowadays to distinguish between the increasingly insane real events in places like Washington, DC and parodies from humor publications.

This hilarious video from The Onion could some day become real as the Social Security Ponzi Scheme continues to implode.

Social Security Reform Bill Encourages Americans To Live Faster, Die Younger

 

Posted in humor, SSA, video | Comments Off

Little Timmy G. on the way to his 12 Step meeting…

Posted by taxguru on July 26, 2011

From Blog Comix

Posted in comix, Geithner | Comments Off

Another sneaky euphemism for Tax Hikes…

Posted by taxguru on July 25, 2011

“Revenue Enhancements”

 

From Blog Comix

 

 

Posted in comix, TaxHikes | Comments Off

S Corp Waiting Period

Posted by taxguru on July 25, 2011

Q:

Subject: a question about converting s corp to c corp

Hello Kerry,

I read your article on converting s corp to c corp and you said when converted, the c corp cannot be changed back to s corp for at least 5 years. I’m wondering if you have official IRS documents supporting that 5-year restriction. We have a client that converted to c corp from s corp in 2009 and now wants to switch back to s corp. I told my boss we cannot do that but she affirmatively said there is a way to reverse the revocation, which I didn’t find. If you can show me the official publication about the cannot change back for 5 years restriction, I can show it to her. The link of your article is: http://www.taxguru.org/corps/scorp.htm Thanks for all your help! Have a great weekend!

Best,

 

A:

That five year waiting period has been around a long time.  Here is the relevant info from Page 19-6 of the latest edition of TheTaxBook:

Five-Year Waiting Period for Reinstatement

If an S corporation election is terminated, whether
by shareholder revocation, ceasing to qualify, or
violating the passive income restrictions, a five-
year waiting period applies during which the
corporation cannot re-elect S corporation status
without IRS consent. [IRC §1362(g)]

From the IRC:

§ 1362(g) Election after termination

If a small business corporation has made an election under subsection (a) and if such election has been terminated under subsection (d), such corporation (and any successor corporation) shall not be eligible to make an election under subsection (a) for any taxable year before its 5th taxable year which begins after the 1st taxable year for which such termination is effective, unless the Secretary consents to such election.

As I constantly advise, it is generally easier to just charter a brand new corp than to mess around with converting from C to S or vice versa.

I hope this helps.

Kerry Kerstetter

 

Follow-Up:

Dear Kerry,
 
Thanks for you immediate response and sorry for writing back to you so late.  I think my boss is determined to go around that 5 year waiting period and I’ll be writing to the Secretary for consent. I’ll let you know how that goes.
 
Best,

 

 

 

Posted in corp | Comments Off

Exploiting nicotine addicts is always popular with our money hungry rulers…

Posted by taxguru on July 25, 2011

From Blog Comix

Posted in comix, SinTaxes | Comments Off

Unfortunately, it’s a year-round condition…

Posted by taxguru on July 25, 2011

 

 

From Blog Comix

Posted in comix, TaxHikes | Comments Off

Corp Fiscal Year Selection

Posted by taxguru on July 24, 2011


Q:

Subject: Blog: Fiscal Year End

Hello TaxGuru,  

Love your blog. Read your article on Choosing a Fiscal Year (posted Jan. 2010), and was hoping you could answer a question for me. I started a business in March 2011, incorporated in Delaware, and operate as a foreign stock corporation in California. On the EIN, I (predictably) chose December 31st as the end of my fiscal year. Your blog suggests June 30 as the ideal corporate year-end date. Aside from the 1128 form you listed, is there anything else I would need to do to make this change? (i.e, amend articles of incorporation? File anything with Delaware and California?). Would really appreciate your advice.  

Respectfully,

  Aspiring 25 year old entrepreneur  

A:

You should be working with a professional tax advisor; especially one who is experienced with multi-state corporate taxation.  It is very easy to screw things up and get into big trouble with the FTB.

As I have said in multiple articles, the fiscal year for a brand new C corp is not officially established with IRS until you file the first 1120 with them, regardless of what you may have entered on the SS-4. You don’t need to send them anything other than your first 1120, or the extension (7004), for the FYE 6/30/11 by 9/15/11.

Good luck.

Kerry Kerstetter

Follow-Up:

Thank you Kerry. Much appreciated!

 

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

 

Posted in corp, Fiscal Year | Comments Off

 
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