Former LLC electing S Corp status still taxed as Schedule C???

[jeff501]

New client came in yesterday, they went to one of the large chains last year. She formed an S Corporation in 2012 and prior to that, in 2011 was a single member LLC. The tax preparer in 2012 correctly used schedule C when doing the client's tax return for 2011. After filing form 2553 and being accepted in 2012, the client went to the large chain and they also filed her as a schedule C business instead of filing an 1120S.

It's early in the morning and excuse my rambling nature here but my question is (maybe I'm second guessing myself here of my understanding of single member LLCs electing S Corp status): since she's continuing to use "LLC" in her name is there any reason the 2012 tax preparer continued to file schedule C instead of an 1120S? My new client paid herself as an employee of her S corp. and presented the preparer with form 2553, and a W2 in the amount of $52,000 for 2012. The Schedule C had net income after expenses and her W2 of $65,000 and paid self employment tax on this remainder.

Thanks in advance for any help with this matter.

[DaveO]

I'm guessing you didn't have to ask them why they were looking for a new preparer. The 2012 1040 must be amended and a 1120S prepared. Hopefully the penalty can be abated.

[Burke]

......is there any reason the 2012 tax preparer continued to file schedule C instead of an 1120S?

My new client paid herself as an employee of her S corp. and presented the preparer with form 2553, and a W2 in the amount of $52,000 for 2012. The Schedule C had net income after expenses and her W2 of $65,000 and paid self employment tax on this remainder. .

Yes. The prior preparer did not know what they were doing. Agree with prior poster... 2012 needs amending. A schedule C does not issue a W-2 to the owner. Was the W-2 for $52K or $65K? Unclear from your post. Also, did the TP file 941's in 2012?

[jeff501]

Thanks for the replies, I thought I was correct here but after sifting through such a mess I had to second guess myself...The W2 was for $52,000 and they filed the 941s in 2013.

I told my client to go back and "walk the Block" and demand they fix her 1040, amend to remove the schedule C, prepare an 1120S for no fee and agree to pay all associated penalties. She said the person who did her taxes in 2013 didn't seem to sure of herself and even interrupted the session "3 or 4 times" to tend to other things. and this was at the "premium" office.