I have a client who hasn't filed for the 3 years since his business began. The business started mid year, so seems logical to me to set him up on a fiscal year. I was first gonna file the return that is due now, then work my way back. I'm thinking filing this return on a fiscal year is no problem, it will be on time for this year. However, I am questioning that since the past 2 years have not been filed. Is filing a fiscal year ok?
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It's probably OK, but don't throw the baby out with the bath water. If he has small profits or even losses, then late returns won't hurt him and you have to weigh the long-term inconvenience of fiscal year calculations every year against the simplicity of calendar year filings for the rest of his business life. What type of entity is it?"The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith -
It is a corp JohnComment
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I'm assuming S filing it too late since it was not timely filed.Comment
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Originally posted by Super Mom View Post
Not necessarily, they MIGHT qualify for "late relief". It would need to be within 3 years and 75 days of the incorporation date.
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If it's an "S" corp, then you have a sticky situation on the late filed returns.
You may not even be able to elect a FY is the 2553 was filed.
Did the client form the corp DIY, or did they use a lawyer.
But if the client has been slack about filing, perhaps the election was never filed.
In that case, you could file as a C corp for the first couple of years, then make the "S" election next year.
That also assumes there are losses or small profits in the late-filed years.
It further assumes there isn't a possibility of a Built In Gains issue in the near future.
For the record, I'd probably opt to have them pay $500 - $800 in penalties (maybe more) and use a CY over choosing a FY.
And the explanation to the client is simple enough - "you did this to yourself.""The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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John, he did use a lawyer, but thought the S election can only be filed with a tax return, am I wrong?Comment
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No, the "s" election can be filed using form 2553. It must be filed within the first 2-1/2 months of the initial year in order to become effective immediately upon startup. Filing with the tax return is a fall-back provision for this situations in which the lawyer and/or client didn't do it right. That often happens when the lawyer doesn't know how to handle it, or when they fill it out and hand it to the client, who then dutifully puts it in their minutes book without sending it in. It almost always happens with home-grown incorporations since the client didn't have a clue from the outset.Last edited by JohnH; 09-10-2014, 11:33 AM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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