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What would be the best way to handle an S Corp revocation…

What would be the best...
What would be the best way to handle an S Corp revocation that was done effective 5/31/17 but the short year tax return was not filed? Now when trying to efile the tax return, it is being rejected indicating wrong entity type and return type.
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Answered in 58 minutes by:
3/13/2018
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,039
Experience: Adjunct Professor
Verified

Hey! I'm Carter, I'm a CPA and can help you with this.

All you can do is paper file the return. You can add a statement to the end of the return explaining it was a short year return and that you were unable to efile.

Let me know if you need anything else. If not, please leave a rating. Thanks!

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Customer reply replied 1 month ago
Thank you, ***** ***** have since found out that the IRS revoked the S Corp election as we requested on 5/31/17 but changed the business status to a C Corp. I’m guessing Form 8832 will need yo be filed. Any other suggestions? Ever had this happen? We are thinking of filing an extension for both C Corp & S Corp to buy some time.

I'd file the extension, it doesn't hurt anything and gives you guys time to get your ducks in a row. Yea, you'll need the 8832 if you do not want it defaulting to a C corp.

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Customer reply replied 1 month ago
Thank you. Out of curiosity, since the election was made to be effective 5/31/17 wouldn’t half the year be reported as an S Corp regardless of the second half of the year entity form? Does the IRS go retro back for S Corp revocation?

You'd have to do S Corp to 5/31/17 and C Corp going forward if it defaulted. You can request late relief on the 8832 so you don't have the C requirement in 2017.

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Customer reply replied 1 month ago
How do we request late relief for 8832, sorry.

It's the very last page of the form.

1. The entity failed to obtain its requested classification as of the date of its formation (or upon the entity's classification becoming relevant) or failed to obtain its requested change in classification solely because Form 8832 was not filed timely.

2. Either: a. The entity has not filed a federal tax or information return for the first year in which the election was intended because the due date has not passed for that year's federal tax or information return; or b. The entity has timely filed all required federal tax returns and information returns (or if not timely, within 6 months after its due date, excluding extensions) consistent with its requested classification for all of the years the entity intended the requested election to be effective and no inconsistent tax or information returns have been filed by or with respect to the entity during any of the tax years. If the eligible entity is not required to file a federal tax return or information return, each affected person who is required to file a federal tax return or information return must have timely filed all such returns (or if not timely, within 6 months after its due date, excluding extensions) consistent with the entity's requested classification for all of the years the entity intended the requested election to be effective and no inconsistent tax or information returns have been filed during any of the tax years.

3. The entity has reasonable cause for its failure to timely make the entity classification election.

4. Three years and 75 days from the requested effective date of the eligible entity's classification election have not passed

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Those are the 4 things you need to meet to get late election.

Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,039
Experience: Adjunct Professor
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