A friend of mine formed an S-Corp in Virginia about a month ago. He used an
attorney to set it up. He also met with an accountant first, so he and they
were clear that an S-Corp was the best entity choice for what he will be
doing. He originally intended that the S-Corp would be set up to actually
become effective as of January 1, 2009 because he won't be starting any
business activity until after that date and he didn't want to be concerned
about having to file a 2008 tax return for the new corporation. But he
apparently didn't communicate that very well to the lawyer and the S-Corp
was filed and became effective about a month ago.
The question now is, "What needs to be done in terms of state (Virginia) and
federal tax returns for the corporation for 2008?" My guess is that since
the articles of incorporation were already filed, and there was nothing in
the articles to say that the effective date of the corporation would be
January 1, 2009, he will need to file a 2008 state and federal corporate tax
return. The only transactions related to the corporation in 2008 will be
the start-up costs which include the filing fee and the attorney fee.
He said that the accountant said all he has to do for this year (2008) is
list his business startup expenses on a form that goes with his personal tax
returns for 2008. That doesn't make sense to me, and I have a hunch that
either he didn't explain the question well to the accountant or he
misunderstood the answer he received.
Am I correct in assuming that he will need to file a 2008 state and federal
tax return for the corporation and that he cannot just list the startup
expenses on a form attached to his personal 2008 returns? And, if he does
have to file a 2008 state and federal tax return for the corporation, and
his only expenses in 2008 will be the filing fee and attorney fee (there is
no business activity and no income for the corporation), is that something
that he can do on his own without having to pay an accountant to do? He
will be using an accountant for books, recordkeeping, tax returns, etc. for
Let's get one thing straight. The Secretary of State (for every state)
doesn't talk to the IRS, or their own revenue departments for that matter.
So, you can form a corporation with the Secretary of State (generally the
place) and never get a tax ID number to report under - and - you can get tax
ID numbers from the IRS and the state revenue departments and never have
filed the corporate papers with the secretary of state.
That being said, there is (or should be) a document from the IRS that
assigned the tax ID number, and one accepting your "S" election. Those
documents, more than anything else, dictate when you have filing due dates.
So, check those documents carefully to see what they say you should be
filing (1120 or 1120S) and when (March 15th for "S" corps). Depending on
what they were told on the SS-4 application for the tax ID number, there
may be other tax reports due.
At a minimum you'll file returns with *mostly* zeros, reporting the start-up
expenses and electing to amortize them. There may be other elections to
make, or other income or expenses to report.
If that's the case, have the accountant prepare the 2008 return. Should be
nearly nothing for this type of return.
And yes, a corporate return IS due for 2008. When is determined by what the
notices that you received from the IRS say. Also the state (and county or
city) generally has some type of tax or fees due of some nominal amount.
Also there will be an annual corporate renewal fee, so have someone check on
Thanks for all of the information. That helps a lot. I'll pass it on to my
I do know that the accountant and lawyer coordinated with each other and one
of them (probably the accountant) did the SS-4 and obtained a federal tax ID
number and did the S-Corp election. The corporation's tax year was set up
to end on December 31, so it's fiscal year is the same as the calendar year.
I just looked up the corporation online on Virginia's website and the
corporation is definitely active and effective now.
Obviously my friend is confused because he thinks his accountant said that
he will not need to file corporate tax returns for 2008, and that he can
just list his business startup expenses on his own 2008 personal tax return.
I think the miscommunication is that the accountant still thinks the
corporation was set up to not become effective until January 1, 2009, but
the lawyer set it up where it is effective now.
Anyway, I'll pass the info on to my friend, and I'll tell him to just have
his accountant do the 2008 state and federal corporate tax returns when they
Paul Thomas, CPA wrote:
BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here.
All logos and trade names are the property of their respective owners.
Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee
neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.