EIN Letter Notice CP 575 A

[TPSigns]

A potential client has come to me asking for tax preparation for her new business she has bought through installment note. She set up LLC herself applying for EIN and state ID numbers in 2023. She gave me a copy of the EIN letter notice. It does not clearly state what tax classification her LLC is in but says "We assigned you a tax classification (corporation, partnership, etc.) based on information obtained from you or your representative." That would be the information the client put in on SS-4 form and anything else.

I asked her for a copy of the original SS-4 application she entered and whether she filed Form 8832 or Form 2553 also. She said, I don't have it, only this letter. She does not remember filing any other forms with the SS-4. I said well what kind you want your LLC to be, she said corporation. (not sure if she understands what tax classification of corporation will be for her LLC) This is a small clothes boutique store in downtown. I have tried to no avail to find out from IRS the exact tax classification for this client on her behalf. She had trouble getting with IRS herself on this prior to me trying on her behalf. I don't know if I want to attempt to guess what business income tax return I need to file for her just in case it is corporation tax classification.

Should I just give up and go with the default tax classification which for this single member LLC would be Schedule C on her personal return?

Any experience with difficulty of this and how was it resolved?

[Uncle Sam]

What exactly did your client purchase? The corporation STOCK from the prior owner(s), or the ASSETS of that corporation and set up her own business?
You also need to inform her of the requirement to file the BOI with FinCEN.
These DIY clients do more damage with what they don't know and think they are saving money.

[TPSigns]

Uncle Sam,

I agree the DIY clients do more damage thinking they are saving money by not using lawyers and accountants. She and the former owner did it themselves using these online companies that help with legal documents etc such as LegalZoom smh. I, CPA, was an afterthought. She did have the documents on the sale and it showed purchase of assets of the business since the former owner wanted to keep her LLC intact to use for later on. No stock. just inventory and equipment. Building was only being leased by the store. It's crazy how much of problematic this is over just simple need to know tax classification imposed by IRS - why couldn't IRS just clearly state so on the notice letter!!!!???? ugh! I am to the point to use the default classification and see what IRS says. I plan to file extension anyway.

Thanks.

[kathyc2]

Uncle Sam,

It's crazy how much of problematic this is over just simple need to know tax classification imposed by IRS - why couldn't IRS just clearly state so on the notice letter!!!!???? ugh! I am to the point to use the default classification and see what IRS says. I plan to file extension anyway.

Thanks.

The purpose of the SS4 is to assign an EIN number. If Box 8a was checked and 8b is one, it won't specifically say file Sch C. If 8a is yes and 8b is 2 or more it will list 1065 as the return to be prepared. EIN letter states to file 8832 or 2553 to be taxed differently. I'm not sure why you are mad at IRS when it's the client who doesn't know if they sent additional forms or not.

[TPSigns]

Exactly, client doesn't know if they sent in additional forms or not plus doesn't have copy of the SS-4 application. IRS isn't making it easy on the client to be clear in the letter that additional form(s) was or was not sent in. If the client had not sent in additional forms, IRS could at least say because of no additional forms received, she has to prepare Form 1040 not 1065 or 1120 unless they receive the additional forms. It has the standard language but doesn't say if either form had been sent to them. If the purpose is to assign EIN number, why then did the EIN letter say she must file Form 941 and 940 but nothing of the income tax return form? Also I have difficulty in getting up with IRS which just adds to my frustration with IRS. All I need is a simple answer to one simple question, what tax return is required to be filed so that the client is in compliance but I haven't been able to find that out with IRS through any calls not to mention that I am deaf. It is hard enough for a hearing person to get through to IRS in calls so with me being deaf it is 200% harder to get through to them. They only have ONE dedicated TTY call line but when I call that line I get a live person immediately but only to be told it is only for individual and they can't discuss anything related to business tax returns. They tell me to call the other line that is for business but surprise! it is not a TTY line. It is voice only which I have called multiple times through relay operator only to get NO live person. There are multiple voice only lines for different areas but they only give ONE TTY line, oh! wait, I am sorry, it's only for individual! Please! I can't help but take offense because I myself am a deaf business owner and there are so many deaf out there in the community that I know own their own business. So excuse me for being upset with IRS. It would have been a whole lot simpler having it stated in the letter and it save me this headache of trying to reach IRS which I haven't been able to as of this day. Hence this message board is my desperate hope. Oh, if the purpose of SS-4 is only to assign EIN and send notice of EIN assignment which I can see stated in SS-4 instructions, I then will advise the client that I will file Schedule C since she is the only sole member and it is in her best interests not to be a C Corporation. Thanks.

[kathyc2]

You need an EIN to file to be treated as anything other than the default so of course it's not showing on the EIN letter. She would have indicated that she has employees on SS4 if they are saying to file 941 and 940. A single member LLC can not file 1065.

If you are concerned she sent 8832 or 2553 try to efile an extension as a 1120 and 1120S. If the extension is rejected you will know she didn't file to be a C or S corp.

[TPSigns]

Kathyc2,

Thanks, that was exactly my concern that she did send a 8832 or 2553 but doesn't remember or have it. I just didn't want to file the wrong tax form and get the client in trouble if in fact she had sent in either. I will need to file extension anyway and will do that. Do you think that the rejection would come immediately before the due date if I were to send an extension now?

[kathyc2]

Kathyc2,

Thanks, that was exactly my concern that she did send a 8832 or 2553 but doesn't remember or have it. I just didn't want to file the wrong tax form and get the client in trouble if in fact she had sent in either. I will need to file extension anyway and will do that. Do you think that the rejection would come immediately before the due date if I were to send an extension now?

If you efile the extension you should receive accept or reject within an hour or so.

[TPSigns]

This is so interesting. I just efiled today 1120 extension for the client and it was accepted. So the Form 8832 had of to be filed. I will ask the client again if she has a copy of that form. If she doesn't, how can she and I get copy of that for her records? Also I don't see how she can be C corporation because I just looked through what she gave me and there is no record of her setting up corporate stock or putting in the capital? The state of incorporation paperwork shows no stock ownership? It does show the business as domestic LLC but it said Stock Status: N/A? Not sure how to proceed. I was so sure the extension efiled would have been rejected but I wanted to go ahead for peace of my mind. That did not work, my mind isn't at ease lol.

[kathyc2]

I've had it in the past where 2553 was not processed and 1120S extension was rejected.

Since it started out as a disregarded entity, they may just look at EIN and name for a match disregarding which form the extension was for.

I think you've done enough for this client and if she says she wants to be a corp but doesn't remember if she sent anything in, have her call and wait on hold to find out.