channge from C Corp

[Super Mom]

I have a client that has been a C Corp for about 9 years because they never elected the S corp status (an oversight). Because of tax purposes they want to change to an S Corp now, how do we go about that? Thanks!!

[Super Mom]

Is it just as simple as filing the 2553 with the IRS? I found this online from Chrono, but that seems too easy!

[Super Mom]

If it is indeed that simple I must get the form in the next few days for the beginning of their fiscal year with the 2 months and 15 days requirement.

[Super Mom]

they only have 3 shareholders, so qualify for S status

[Super Mom]

I have read the instructions for the 2553 and sounds indeed as if I need to do that form up to 2 months and 15 days from beginning of tax year for them. I would feel much better to have a second on that. It is hard to believe anything with the IRS is that simple! Thanks!

[BOB W]

The complexity comes when you have to keep track of C Corp profits verses S Corp AAA accounts. Then there is Built in Gaines Tax from the C Corp. Then there is a pecking order when distribution are made. TTB should have info on these issues. Check it out.

[TaxGuyBill]

I have read the instructions for the 2553 and sounds indeed as if I need to do that form up to 2 months and 15 days from beginning of tax year for them. I would feel much better to have a second on that. It is hard to believe anything with the IRS is that simple! Thanks!

That is correct.

There are provisions to apply to try to retroactively claim S-status, but if they have been properly filing as a C-corporation, I don't think that is available.

[Super Mom]

Ok, mustn't an S Corp have a calander year, this TP is on a fiscal year ending 6/30. The instructions talk like any year, but they don't actually say FISCAL year, and I can't wrap my head around how a fiscal year would always work with the schedule K and shareholders needing to file. HELP!

[Super Mom]

Ok, I should have read the form 2553 more closely! It does mention fiscal year, but I still can't wrap my head around the mechanics of shareholders waiting for schedule K's to file. In our instance it would work because the shareholders can get the extension, but it wouldn't work in all instances would it?

[BOB W]

I believe there is a 2 or 3 month window on either side of December where an S Corp can have a fiscal year end but there must be a business reason for the non calendar year.

The K-1 ending date is the year it is reported on the 1040.

[Super Mom]

so fiscal year ending 6/30/2016 would be filed on 2015 forms, but even though the K-1 is on a 2015 form it is filed for 2016????

[BOB W]

June 30 ending is not allowed for an S Corp. The year ending date is the date that goes on the 1040 corresponding date.

[BOB W]

The year ending date of the S Corp controls the year it is reported on the 1040. An S Corp cannot have a date of 6/30/xx

[BOB W]

When you set up the client you will specify it fiscal year. Yes it is processed on 2015 program but reported on a 2016 1040. The other choice is to just file a short year for the C Corp 7/1/xx - 12/31/xx and make the S Corp start 1/1/xx.

[BOB W]

Retain earnings of a C Corp becomes a problem when an S election is made. Keep doing more research in TTB and Google. Keep reading ALL in the instructions on S Elections, There is a lot to know before an election is made from a C Corp.