Closing company, Final Form 1120S

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Hayden
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Closing company, Final Form 1120S

Post by Hayden »

For many years I have done the Form 1120S myself using TurboTax Business. no problems.

I am closing my business this year, and opened TurboTax just to see how it handles the final return. It gave me this warning:

"Since this is your corporation's final return, you should know that corporate liquidations and dissolutions have wide-ranging tax implications. They are potentially taxable to your corporation and to its shareholders. You may want to consult a qualified tax advisor about the complex rules that govern liquidations and dissolutions under the Internal Revenue Code."

So, are there really strange things that happen in the final business tax return?

I understand that there are issues on my personal tax return (potentially either a loss or a taxable gain, depending on my basis).

I had planned to just use TurboTax business. Should I heed their warning and hire someone to do the final return?
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8foot7
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Re: Closing company, Final Form 1120S

Post by 8foot7 »

In 2011 i faced a similar issue. I simply checked final return and filed. Never heard a peep. I do not advise or recommend this strategy. Just relaying an experience. (This is not tax advice, but a tax story. If your interest lasts longer than four hours, seek medical attention.)
fabdog
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Re: Closing company, Final Form 1120S

Post by fabdog »

Here's the IRS faq...

https://www.irs.gov/newsroom/closing-a-corporation

depending on what you have for stock assets, etc it can get complicated. So I guess it depends on how complex your business is... lots of employees? lots of assets? Stockholder basis?

Mike
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Hayden
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Re: Closing company, Final Form 1120S

Post by Hayden »

8foot7 wrote: Sun May 09, 2021 6:37 pm In 2011 i faced a similar issue. I simply checked final return and filed. Never heard a peep. I do not advise or recommend this strategy. Just relaying an experience. (This is not tax advice, but a tax story. If your interest lasts longer than four hours, seek medical attention.)
I am inclined to do the same. I find it easier (and faster) to just do these things myself rather than go through an intermediary (CPA).
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Hayden
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Re: Closing company, Final Form 1120S

Post by Hayden »

fabdog wrote: Sun May 09, 2021 6:52 pm Here's the IRS faq...

https://www.irs.gov/newsroom/closing-a-corporation

depending on what you have for stock assets, etc it can get complicated. So I guess it depends on how complex your business is... lots of employees? lots of assets? Stockholder basis?

Mike
My situation is very simple. Employees have been transitioned to other companies and I have submitted final 940, final 941, W2s, 1099s. I have been tracking Stockholder Basis from the beginning. I feel like i understand what needs to be done.

Of course, its the stuff you don't know that gets you :D
hachiko
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Re: Closing company, Final Form 1120S

Post by hachiko »

What do you mean by "been transitioned"? Did you receive some sort of buyout? Did you enter into an agreement with another company to take over your employment obligations? Or do you mean, they've all just been terminated and are working elsewhere now?

What are the assets and liabilities right now? If you have a clean balance sheet, it shouldn't be all that hard to file the final return.

If it really is that simple, you have no shareholder-corporation transactions (including non-cash property transferred from s/h to corp or the other way), no suspended losses, no depreciation recapture/fixed asset complications, no forgiven debts, etc., I'd say the final tax return is not that complicated. The legal dissolution and liquidation requirements are probably more complicated than the tax returns.

Make sure you continue to file required employment returns and close out all your various tax accounts. I don't think you can file the W-2/W-3 until the following calendar year, so that's something you still have to track.
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bsteiner
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Re: Closing company, Final Form 1120S

Post by bsteiner »

Hayden wrote: Sun May 09, 2021 12:32 pm For many years I have done the Form 1120S myself using TurboTax Business. no problems.

I am closing my business this year, and opened TurboTax just to see how it handles the final return. It gave me this warning:

"Since this is your corporation's final return, you should know that corporate liquidations and dissolutions have wide-ranging tax implications. They are potentially taxable to your corporation and to its shareholders. You may want to consult a qualified tax advisor about the complex rules that govern liquidations and dissolutions under the Internal Revenue Code."

So, are there really strange things that happen in the final business tax return?

I understand that there are issues on my personal tax return (potentially either a loss or a taxable gain, depending on my basis).

I had planned to just use TurboTax business. Should I heed their warning and hire someone to do the final return?
Distributions of assets are treated as if the corporation sold them at fair market value and distributed the cash.
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Hayden
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Re: Closing company, Final Form 1120S

Post by Hayden »

bsteiner wrote: Mon May 10, 2021 2:09 pm
Hayden wrote: Sun May 09, 2021 12:32 pm For many years I have done the Form 1120S myself using TurboTax Business. no problems.

I am closing my business this year, and opened TurboTax just to see how it handles the final return. It gave me this warning:

"Since this is your corporation's final return, you should know that corporate liquidations and dissolutions have wide-ranging tax implications. They are potentially taxable to your corporation and to its shareholders. You may want to consult a qualified tax advisor about the complex rules that govern liquidations and dissolutions under the Internal Revenue Code."

So, are there really strange things that happen in the final business tax return?

I understand that there are issues on my personal tax return (potentially either a loss or a taxable gain, depending on my basis).

I had planned to just use TurboTax business. Should I heed their warning and hire someone to do the final return?
Distributions of assets are treated as if the corporation sold them at fair market value and distributed the cash.
Thank you. that is probably the only complication i have. I have a desk, chair, file cabinet, computer, monitor. I guess I will distribute them to myself.
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Hayden
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Re: Closing company, Final Form 1120S

Post by Hayden »

hachiko wrote: Mon May 10, 2021 2:06 pm What do you mean by "been transitioned"? Did you receive some sort of buyout? Did you enter into an agreement with another company to take over your employment obligations? Or do you mean, they've all just been terminated and are working elsewhere now?

What are the assets and liabilities right now? If you have a clean balance sheet, it shouldn't be all that hard to file the final return.

If it really is that simple, you have no shareholder-corporation transactions (including non-cash property transferred from s/h to corp or the other way), no suspended losses, no depreciation recapture/fixed asset complications, no forgiven debts, etc., I'd say the final tax return is not that complicated. The legal dissolution and liquidation requirements are probably more complicated than the tax returns.

Make sure you continue to file required employment returns and close out all your various tax accounts. I don't think you can file the W-2/W-3 until the following calendar year, so that's something you still have to track.
to answer your question, by "transitioned" i mean they all found jobs at another firm. that is typical in my industry.

I submitted final W2, final 940, final 941 at the end of 2020. I believe all of those accounts are properly closed out.

No assets on the books - everything has been fully depreciated or was expensed when purchased.

I guess I will need to distribute my computer, desk, monitor, chair, file cabinet to myself.
hachiko
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Re: Closing company, Final Form 1120S

Post by hachiko »

Hayden wrote: Tue May 11, 2021 6:31 pm
hachiko wrote: Mon May 10, 2021 2:06 pm What do you mean by "been transitioned"? Did you receive some sort of buyout? Did you enter into an agreement with another company to take over your employment obligations? Or do you mean, they've all just been terminated and are working elsewhere now?

What are the assets and liabilities right now? If you have a clean balance sheet, it shouldn't be all that hard to file the final return.

If it really is that simple, you have no shareholder-corporation transactions (including non-cash property transferred from s/h to corp or the other way), no suspended losses, no depreciation recapture/fixed asset complications, no forgiven debts, etc., I'd say the final tax return is not that complicated. The legal dissolution and liquidation requirements are probably more complicated than the tax returns.

Make sure you continue to file required employment returns and close out all your various tax accounts. I don't think you can file the W-2/W-3 until the following calendar year, so that's something you still have to track.
to answer your question, by "transitioned" i mean they all found jobs at another firm. that is typical in my industry.

I submitted final W2, final 940, final 941 at the end of 2020. I believe all of those accounts are properly closed out.

No assets on the books - everything has been fully depreciated or was expensed when purchased.

I guess I will need to distribute my computer, desk, monitor, chair, file cabinet to myself.
Just to clarify, assets on the books are different than whether the company has tax basis in any assets. As bsteiner noted, with no tax basis, you'll probably recognize a gain on those. I don't know if Turbotax can handle that stuff through their "question and answer" interface, so you may need to do some manual overrides.
Made money. Lost money. Learned to stop counting.
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