I started an S corp April 2010 but the project was put on hold. We didn't file the 1120S or 2253 that were due 3/15/2011. This month we are starting to work on a project which will start to bring income n for this company. Should I file the late 1120S and 2253 now?? Then we have to also ammend our personal 2010 return as well? Thanks for the help...
Disclaimer: This is not legal advice nor does it constitute an attorney-client relationship.
Nothing to fret about regarding 2010, provided the company made no income in 2010. Here's why:
-The corporation was started in April 2010. Since you did not file form 2553 (not 2253 as stated in the OP), the corporation is considered a C-corporation for the duration of 2010. C-corporations that have zero income effectively have 0 tax penalty because tax penalties are based on %age of income (net amount due). You should still file a standard 1120 for 2010 and declare 0 income to establish a paper trail for the IRS. http://blog.pappastax.com/index.php/2009/09/15/s-corporation-loss-limitations/
-S-corps do have penalty based on # of shareholders (http://www.law.cornell.edu/uscode/usc_sec_26_00006699----000-.html) for failure to file return but since you didn't declare the company as an S-corporation, there's no fee for 2010.
-Retroactively declaring a S-Corp? Here's some more info: http://taxes.about.com/od/scorporations/a/scorp_formation_2.htm
You should file as soon as possible. The instructions for the Form 1120S says
Late filing of return.
That's enough to get my attention. I would check out "reasonable cause". If you aren't successful getting the penalty abated, then consider the fact that your corporation does not have any assets with which it can pay those penalties. So, if this turns out to be a financial disaster, the corporation could just recognize its insolvency and not pay the penalties. I am not a lawyer, but I think that as an investor in a corporation, you would probably not be liable for its debts. To begin again, you would have to form a new corporation.