I have a potential new client who filed to be an S-Corp as of 4/1/05. He had been a sole proprietor. He opened a bank account under the S-Corp EIN and has being running all of his income and expenses through the account. Since this is the first year the S-Corp would be filing, does he have to file as an S-Corp or can he still file as a sole proprietor and never recoginze the S-Corp has having been in effect? He just came to me last week and I told him about the payroll taxes he should have been paying as an employee of the S-Corp, which he did not pay. Any thoughts would help. Thanks
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Originally posted by TaxmanI have a potential new client who filed to be an S-Corp as of 4/1/05. He had been a sole proprietor. He opened a bank account under the S-Corp EIN and has being running all of his income and expenses through the account. Since this is the first year the S-Corp would be filing, does he have to file as an S-Corp or can he still file as a sole proprietor and never recoginze the S-Corp has having been in effect? He just came to me last week and I told him about the payroll taxes he should have been paying as an employee of the S-Corp, which he did not pay. Any thoughts would help. Thanks
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Thanks
for the response. I figured he would have to file the 1120S. We're going to file sch C for Jan - Mar and then the 1120S for Apr - Dec. I told him more likely then not the IRS will have a problem with no wages being paid. He took distributions of about $30,000 about the same amount of net income. Thanks again.
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