S Corp

[S T]

I am running out of time and

I have an S Corp that was formed mid year from a Sched C and is currently on extension.

I know that the income is correct, and have income that will be passed through to the 2 Shareholders on the K-1, and yes they have reasonable wages reported on W-2 forms.

I am having a problem on the balance sheet with the conversion, so my question is:

Can I complete the shareholder's form 1040, and I not file the 1120S until I can straighten out the balance sheet. I can't see where the balance sheet will affect the shareholders in any way other than maybe a loan or distribution. But won't affect the income that needs to be reported on their individual tax return. Not concerned too much about basis, as it is all profit, no losses.

Thoughts?

Sandy

[Snaggletooth]

Good Question

Sandy, I don't know whether you would be "allowed" to give them K-1s without filing the 1120S, but I also don't think IRS has a mechanism in place to catch it.

But I wouldn't do it. Most of my sub S customers want to ignore balance sheet information, and I absolutely must have their co-operation to put it all together. I'm afraid if I didn't hold their K-1 hostage to the balance sheet, I might never get it. They need to understand that if they want to incorporate they will have enhanced reporting requirements, and the balance sheet is one of them.

[S T]

I have

Good client,

I have some control over the bookkeeping, just having some problems with the conversion over from Sched C and into the 1120S Corp. So not worried about holding anything hostage.

It is just going to take some time to make the right bookkeeping entries, which I have isolated, none of which are income. Somewhere in the loans from shareholders and liabilities transferred , and the transfer of assets.

So my choices seem to be file a incorrect balance sheet on the 1120s and then amend, file the individuals on extension and have them pay without the form,s or efile their individual returns and have them pay, and do the 1120S in about 1 week, or some mix of one these.

Maybe I will find it in the morning!

Sandy

[JG EA]

Sandy

I have seen in the past CPA returns that estimated the K-1's from available information and threw the whole amount into dividends. So, I assume from that it is correct to put the cart before the horse. They were pretty sure of the amount however as you would be.

[OldJack]

In my opinion an income statement is the result of a correct balance sheet.

Without knowing the balance sheet is correct you don't know if the income statement is correct as most adjustments needed for the balance sheet are going to change the income statement. I would never issue a k1 without the balance sheet properly prepared.

[OldJack]

I have seen in the past CPA returns that estimated the K-1's from available information and threw the whole amount into dividends.

JG EA, if that is true those CPA's should be reported to their state accountancy board for discipline as that is definitely not allowed. A CPA is not allowed to "fudge/plug" numbers for tax returns or any other report. True, a S-corp could prepare a tax return with estimates and later file an amended tax return just like any one else could but the CPA should not be the one making the estimates.

[Bird Legs]

S Corp. Return

I just did exactly what was described. I do the books for an S Corp. converted to an S from a Sched. C on 1-1-06. Because of health reasons I could not complete the 1120S.
I did a best guess estimate for the K-1. based on previous operations. Completed the
1040. There was a W-2 from the S corp.
Then when I complete the 1120s, will file an amended 1040.
I will be starting chemotherapy this coming week.
Just hope I can get out all my extensions.

Please let me know if the above procedure is incorrect and also what the proper procedure should have been.

[outwest]

Though I admire those with no extensions...

I would rather file one correct return than amend later.

In this situation I would also extend the 1040, use the estimated K-1 figures to calculate a payment (if needed) with the extension then calmly work through the returns and file accurately.

As long as the money is paid by the due date, the client is not going to suffer undue penalties, probably cost less the the amended return preparation.