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Discussion:S-Corp election made in error
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Discussion Forum Index --> Basic Tax Questions --> S-Corp election made in error
Discussion Forum Index --> Tax Questions --> S-Corp election made in error
KMiller (talk|edits) said:
| 30 April 2010
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| I recently acquired a client that was originally setup as an LLC with the election to be taxed as a c corp. The person who was preparing their tax returns prior to me, elected for them to file as an s-corp. However, the client is an insurance company and therefore is not allowed s-corp status. Is there a simple way to correct this error? Is there any tax consequences that I should be aware of as a result of this error?
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Jctmstx (talk|edits) said:
| 30 April 2010
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| See the instructions for form 1120S page two.
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Seaside CPA (talk|edits) said:
| 30 April 2010
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| Is the client an insurance company, or an insurance agent?
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LH2004 (talk|edits) said:
| April 30, 2010
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| For an LLC, or anything else other than a state-law insurance company, to be an insurance company, it would have to be in one of the very few business classified as "insurance or annuity contracts" by sec. 816(a) but not by state insurance law. A company more than half of whose business was writing product warranties might qualify, but that's about it.
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Doug M (talk|edits) said:
| 30 April 2010
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| Kmiller:
Seaside hit it right==Insurance "company" or insurance "agency"
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KMiller (talk|edits) said:
| 30 April 2010
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| When you say insurance "company" do you mean a company as in Allstate or Progessive? The client has an insurance "company" that is authorized to provide insurance through Progressive and Bluecross, etc. So, I guess that would make the company an agent of Progressive??? Does that type of insurance company qualify to be an s corp?
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JR1 (talk|edits) said:
| April 30, 2010
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| I have a Northwestern AGENT who is also prohibited from S status. So we've not inc'd him. Don't know if that's state law or what...
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Doug M (talk|edits) said:
| 30 April 2010
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| Kmiller: you are okay from IRS standpoint. You have a client that is operating as an agent/agency.
He gets a commission for placing an insurance product with a "company" like Progessive or Bluecross.
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Seaside CPA (talk|edits) said:
| 30 April 2010
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| Agree with Doug. Client is allowed S status; is considered an agent, not an insurance "company".
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