Discussion:1065 or 1120s that had no transactions

A client of mine opened up a two 1120s in 2006 but there were no transactions. Maybe just the fee to get the state incorpation. Do they need to file the returns?

Is this is the same with the 1065. I know if a schedule C business owner does not do anything the year he/she opened up the business, then they do not have to file a schedule C.

Please advise,

Thanks,

Bj

Reg § 1.6012-2. Corporations required to make returns of income. (a) In general. (1) Requirement of return. Except as provided in paragraphs (e) and (g)(1) of this section with respect to charitable and other organizations having unrelated business income and to certain foreign corporations, respectively, every corporation, as defined in section 7701(a)(3), subject to taxation under subtitle A of the Code shall make a return of income regardless of whether it has taxable income or regardless of the amount of its gross income. (2) Existence of corporation. A corporation in existence during any portion of a taxable year is required to make a return. If a corporation was not in existence throughout an annual accounting period (either calendar year or fiscal year), the corporation is required to make a return for that fractional part of a year during which it was in existence. A corporation is not in existence after it ceases business and dissolves, retaining no assets, whether or not under State law it may thereafter be treated as continuing as a corporation for certain limited purposes connected with winding up its affairs, such as for the purpose of suing and being sued. If the corporation has valuable claims for which it will bring suit during this period, it has retained assets and therefore continues in existence. A corporation does not go out of existence if it is turned over to receivers or trustees who continue to operate it. If a corporation has received a charter but has never perfected its organization and has transacted no business and has no income from any source, it may upon presentation of the facts to the district director be relieved from the necessity of making a return. In the absence of a proper showing of such facts to the district director, a corporation will be required to make a return.

So you have not filed from some returns that were dormant the IRS did not look into it?

I will have to call them bad boys myself.

Thanks,

Bj

I'll respectfully disagree. You should file returns w/ all 0's. And yes, CA wants the $800 fee, but they also require a return with the fee. You should also note that the $800 loss would flow through to the taxpayer at the federal level. Chump change to some, but I'll take it.

If anything, the company will get the "chump change loss." I guess that is enough to offset the fee to prepare the return.

Thanks JR and San Diego..

Will

Publication 542, page 5, under Who Must File. Pub 542 is for Corporations, but I'm sure this also applies to Partnerships. I believe if an SS-4 form was filed with the IRS and the beginning date of the corp was listed as any date in 2006, then the Form 1120S must be filed by March 15th (unless using a fiscal year), even if you leave it blank. By the way, don't enter zeroes on blank lines. Just leave them blank.

So you are saying just prepare the return with no numbers in it. Sounds easy.

Is that all.

Bj

I incorporated in feb of 2001 as a c-corp in the state of Florida. Yesterday I got a call that I havn't filed for state tax since then. The corporation has been dormant, in name only since 2001, I have filed 0 on my sales tax and kept the corporation active with the state all these years. The lady on the phone mentioned that I'd might have to pay penalties because I did not file for state tax, nor federal tax. I simply did not know, that I had to file, because the business was not active. Excuse my ignorance.

As far as thefederal tax, it mentions that the penalty is $100.00 each year, there is an option of including a note with your 1120 form explaining why you didn't pay. The sate penalty might be even higher. Should I file both returns and add a note explaining the situation, and leave it at their mercy. If I dissolve the corporation, will they still demand these penalty fees?

The reason I kept the corporation active all these years was because i wanted the business to have a maturity, and it was a tech company that was based on an idea that needed a financial backer...that never happened.

Any help and suggestions will be greatly appreciated.

Fed and state t/r must be filed. You can say inactive.