SCorp - After filing 1120S forms for 5 years IRS claims client is not an SCorp


#1

I have a client that we have filing his returns since 2011 as 1120S S-Corporation. He has 2 SCorp’s that were supposed formed by an attorney, one for the Bar and the other for the building. Our issue is that IRS claims the bar is a C Corp.
Unfortunately, we don’t have the Form 2553 or the IRS Acceptance Notice.
Here are the facts concerning the bar which we have filed 1120S returns for since 2011.

  1. For 2011 & 2012 we efiled 7004 1120S Extension and they were Accepted.
  2. We timely paper filed the Federal & MN corporate returns for 2011 & 2012.
  3. In 2013 we paper filed the 7004 extension and Federal & MN corporate returns.
  4. In 2014 we paper filed the 7004 extension and Federal & MN corporate returns. Note: We tried to efile the 7004 and it was rejected. After we paper filed the 1120S we got a letter stating that company was a C Corp.
  5. Sent IRS a letter stating we had been filing as SCorp. Never got a response
  6. Paper filed 2015 7004 and 1120S, got letter from IRS.
  7. I called IRS and they said they had no record of the 1120S returns for all the years.
  8. We reported all the SCorp K-1 income on the Taxpayer’s 1040 return.

Question: How do I respond to the IRS? I know there is a Rev Proc. that says you can go back 3 1/2 years but then what happens with 2011 & 2012. Appreciate any thoughts


#2

tax46,

My first question is have you pulled transcripts on all the years? A good transcript review for the years will let you see what is actually posted on the account. Also, have all the pass through returns been filled by the members of the “S”? If I was fighting this situation, I would be going to Taxpayer Advocates as soon as possible trying to get some assistance.


#3

I have the same issue with a client of mine. Can this matter be resolved with a private letter ruling and has anyone in the community been able to achieve a successful resolution on such a matter. I would be interested in engaging them to help resolve this issue for my client. Thank you.