Without appropriate professional advice, entrepreneurial taxpayer, BB, decided to form a Company, go into business and strike out on his own. The good news is that the taxpayer made it big – everything he touched turned to gold. The bad news is that he failed to timely file a subchapter S election for his new Company – an election which entitles owners to avoid double taxation normally associated with corporations that do not meet certain qualifications.
Shortly after filing his Company’s tax returns, he receives a letter from the IRS stating his tax return has been rejected. Not only must he resubmit his corporate tax return, but his individual income tax return is wrong as well. The IRS recognizes that many new owners would have done this correctly if they had only known and provides certain relief provisions if you qualify. Though carefully navigating through applicable relief provisions, we were able to have the IRS accept his return as originally filed, thereby not only saving him the double taxation that would have been attributed to last tax year but the double taxation associated with the current year that he hasn’t even thought about. Total professional fees approximated $500.