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Tax Information With A Mother's Touch
Published by Eva Rosenberg, MBA, EA
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Tax Information With A Mother's Touch Published by Eva Rosenberg, MBA, EA |
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 Last week, we had this question from Rob in Sparta, NJ: Dear TaxMama, I paid a filing company to register an s-corp for me back in 1997. I filed returns back in 97 & 98 and just got a letter from NJ claiming that since I am a C corp i owe them $7000 for 1997. I since found out that the company failed to register me as an S-corp in NJ. (The article can be found in Issue 202) <TaxPro Replies> Dear TaxMama, On the NJ S corp issue/question, while "I, too, don't know nuthin' 'bout no 'Jersey tax law," the "normal" rule is that as long as the Federal election is properly & timely filed, it has a "trickle-down/carryover" effect for all State income tax return treatments as well so the fact that a "particular filing" wasn't made with NJ shouldn't disqualify the corp as an S corp at both levels. (OH &, BY THE WAY, there "are" certain specialized, meticulous "more tax-oriented tax lawyers than corporate lawyers" like me who make ABSOLUTELY SURE that the S corp election is timely filed when incorporating a new company & always that whatever the applicable State law is, that that is complied with as well). I HATE lawyers who "don't do their jobs" or do it sloppily and don't even "read" the applicable State statutes, regs, publications or look for forms that can and will effect State effects.) If NJ ultimately won't accept the S election (a fight that "I" would frankly take all the way up the NJ Tax Board's appeals' levels and then fight in court if necessary), then since the statute of limitations for NJ to collect taxes, interest and penalties haven't run, I would suggest that the guy either (a) sue the company for all of those amounts as well as other damages if they're still in business or a successor company can be found or (b) use NJ's version of what's analogous to the IRS's "Compromise Offer" program, using either or both the "doubt as to collectibility" and/or "doubt as to liability" based on legal authorities & let the guy try to cut a deal with NJ to pay "some" reasonable amount since this wasn't his fault Dean Young, P.C. McDonough GA <TaxMama's Note> Rob settled the case with NJ for about half. It saves him time and lets him move on with more important work. I would not have settled it. In fact, just this week, a California client got an audit report from the IRS, disallowing his S-Corp status because they don't have a copy of this application to be an S-Corp. (Form 2553 - see last week's question for the link Not only were they going to assess tax againt his corporate profits, they also claimed that they would charge him payroll taxes on that amount, since he undoubtedly drew that from the company. Going back to the information I wrote in last week's issue, I copied off the words "FILED PURSUANT TO REV. PROC. 98-55'" and wrote them on top of a freshly printed Form 2553. I called the auditor, discussed the situation. I told her that I proposed to send her the form with those words on top, and a copy of the original SS-4 Application for Taxpayer ID # that said they were going to be an S-Corp. She said, "You get that to me, with the signatures in all the right places, showing the current date, and I'll cancel my audit assessment." (It had not yet been filed with IRS.) That's the kind of result I expect from reasonable taxing agencies. And that's why I generally agree with Dean. It's worth fighting the assesment. Eva Rosenberg Your TaxMama Fighting For You!  |
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| Library of Congress - ISSN 1532-0790 Copyright © 2000-2003 - Eva Rosenberg |
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