CA penalties for not filing business return

[Ross]

I have a new client. He is a college coach and operates sport camps as a side job. In 2006 he created an S Corp when he was living in CA. He did not file an 1120S. Instead the income and expenses were reported on his Schedule C. He had losses every year.

CA sent a notice for not filing business returns with them. He responded that he had losses each year and it was reported on his schedule C. However, he said that they are still assessing him approx. $3,400 in penalties and fines for not filing a business return in CA. He was only in CA for a year or so and the camps were not held in CA. Any suggestions on how he can avoid the penalties? TIA.

[Y2KEA]

I see this happen quite often. Someone creates a CA corporation & then never engages in any activity & does not file returns. Then they start getting love letters from FTB. The thing to remember here is that the corporation is responsible for the fees. I have never seen or heard of FTB trying to collect from individual owners/shareholders. Tell him don't worry about it.

[S T]

Had one about 5 years ago

You or client can call FTB # - state inactive, If your client is not concerned about having an active S Corp or another active S Corp in Calif.

In my case FTB said don't worry about it, don't pay - they mark as inactive, but I would make the phone call. Also have them call Sec of State or go online to close the Corp - there is an annual filing fee as well for S Corp in Calif.

FTB is assessing penalties and collection of the mandatory $800 Franchise Fee for Corps after the 1st year

Sandy

[kpangelinan]

Had this exact thing happen to me when I moved my corporation out of California and never closed it with the state....a simple letter set it straight.

[joanmcq]

CA won't close the corp until the required biz returns are filed and the fees paid. It's an expensive lesson to learn.

[kpangelinan]

CA won't close the corp until the required biz returns are filed and the fees paid. It's an expensive lesson to learn.

Not true....I left CA (moved to another state and started a corp in that state for my practice) in 2003 with a C-corp and while I filed my final returns with the IRS and state, I never closed the corp with them and I got a series of letters in 2007 for the corp fees for 2004, 2005, and 2006 for over $3000 with penalties and interest.

They weren't looking for returns as I was not required to file.

I called them and everything was closed and no money owed. This was in 2007.

Don't ask me why they didn't contact me sooner than 2007. Maybe they were busy.