Tax Guru – Ker$tetter Letter

Q:

Subject: C Corporation and S Corporation question

S-Corporation.  I did some research and I believe that I qualify as I am the only officer/member.  My questions are:

1.       Based on the researc0h I did, it seems that with a c-corp I can wait until November to file my taxes (no gains, only losses) which is the anniversary date.  Is this correct?

2.       If the s-corp falls into the same category as individual income tax, I assume that with an s-corp, the deadline to file the taxes is april 15th.  Is this correct?

3.       Assuming number 2 is correct, if I wait until after April 15th to convert my c-corp to an s-corp, do I still have to file the taxes by November or can I wait till the following year (January through april 15th) to file the taxes?

I am totally clueless with this and the IRS website is somewhat confusing.  Please help me.

Thanks so much!

Have a beautiful evening!

A:

You need to be working with a professional tax advisor before you do anything else because your research is obviously not working.  Just from the items you mentioned, there are several misconceptions you have, and I’m sure you have dozens more that you didn’t mention.

Here are just a couple of issues that you are confused about.

Tax Year – If you remain a C corp, its tax year can be set to end at the end of any month prior to the one year anniversary of the incorporation.  There are many reasons for using a tax year other than December 31, as I mentioned on my website.    The corp tax return (1120) or an extension (7004) is due to IRS by 2.5 months after the end of the tax year. Once you have filed your first 1120 and established the tax year for that corp, it is set in stone.

If you do successfully convert to an S corp, its tax year must go from January 1 through December 31 and its filing deadline will be the next March 15.

While there are some exceptions for filing the S election (2553) late, the normal deadline is by March 15 of the year in which you want it to take effect.

Before you take the step of electing to be an S corp, you most definitely need to work with an experienced professional tax advisor to see if that is a good idea and to make sure you understand completely how to operate your corp (C or S).  You are guaranteed to get yourself into serious trouble if you continue to try to muddle through these things on your own, if you haven’t already.

Good luck.

Kerry Kerstetter