Taxpayer purchased a pizzeria business in April 2021. On March 14th, 2022, he asked me to file his 2021 S Corp return. He said that although the extension has already been filed, he would like to file the return before the deadline. He emailed me the information, and I filed the return which was accepted by the IRS.
In April 2022, he informed me that the business was sold. I then told him that he has a lot of time to gather all the papers together so we can file the return in January 2023. Two days ago (March 13th) he sent me the closing statement and the rest of the information to complete the return. I told him that I will file the extension and complete the return within the next two weeks. This is where the problem started.
The extension was Rejected. "WRONG RETURN TYPE FOR CORPORATION; The Return type used is not the return type the IRS has in its records for this organization."
I gave him the IRS number to call. The agent told him that the business is a C Corp, and he needs to select the correct return type. Also, they have no record of the S Corp filing.
He had a $20,000 loss on the 2021 return. To top it off he did not even file his 2021 personal return.
It has been two years since the business was incorporated. Can we still file a 2553 election for S Corp status?
No matter how you put it there will definitely be penalties.
Your input will be greatly appreciated.