Corporation tax year

A corporation was formed on 7-18-2020.

If the corporation is on calendar year, the initial tax return (year 2020) would be late by now already.

Can the corporation choose to be on fiscal year now, such as from 7/1/2020 to 6/30/2020? In this case, the initail tax return (year 2020) is still not late yet.

"Late Election Relief" in the Form 8832 instructions is a good place to start.

Did the corp have any taxable income for the 2020 calendar year?

Electing a fiscal year to avoid a penalty seems like letting the tail wag the dog a bit to me...

Yeah, duh. First return, easy abatement. And if it's an S or intended to be, fiscal year is pretty much out anyway.

But perhaps there are certain elections that can only be made on a timely filed return?

9100 often can help. https://www.thetaxadviser.com/issues/20 ... 14-03.html https://www.journalofaccountancy.com/ne ... elief.html

What is best for the client, C corp or S corp?

If an S election was not made, then I would elect fiscal year, then convert to S on 7/1/2021. Obviously you want to minimize any BIG

If an S election was made, then you have a calendar year. Unless you want to deal with §444.

Or, are you going to ask for relief for both issues? (S election late and fiscal year)

Sorry, it is a C-corp. And no election was made to a S-corp, at least not yet.

By the way, there was no income at all in 2020 and only small amount of expenses. What will be the penalties on the late filing of the C-corp 2020 tax return?

Biggest penalty is locking in the loss if you elect S. Why would anyone want to be a C? Foreign s/h, HUGE medical expenses and no other employees....multi-state operation which simplifies 1040 filings....that's about all I can think of. Vulture capitalist investors.

there was no income at all in 2020 and only small amount of expenses

Did it actually start business operations in 2020? Were these startup expenses?

there was no income at all in 2020 and only small amount of expenses

Did it actually start business operations in 2020? Were these startup expenses?

The corporation was filed with the Secretary of State in 2020. But there were no activities at all in 2020 based on what he said.

And yes, the small amount of expenses in 2020 were setup expenses, such as hiring a company to set up the Corporation for him.

Then was there a filing requirement for 2020?

But the corporation was technically in existence in 2020.

OK. I just checked the 1120 instructions. It should have filed. Do it now. You'll have zero income, zero deductions (start up costs will be on the balance sheet) and zero penalty.

Thank you sjrcpa.

That is my plan too. Just advise the client to file a 1120 with all zeros as even the set-up cost is not deductible in this 2020 tax return since the business operation has not started yet by the end of the year.

As for the potential penalties, I have checked too and I agreed with you. There will be no Federal penalties as there is no balance due in the federal tax return with zero income. As for the state tax return, the business is in California and the FTB here waives the corporation minimum tax in the initial year of the tax return. So there will no state tax and therefore no state penalties either.

If anyone holds a different opinion, please make it known. Thank you.

What are referred to as setup expenses above sound to me like organizational expenditures. They are also (apparently) not startup expenditures either. So don't forget to handle them with the election permitted by section 248 in whatever year they begin business.

Code says election may be made "for any taxable year" by the due date including extensions for "such year". That's misleading. Even if they had extended 2020, which you say they didn't, they can't make the election for that year.

I recommend a close reading of 248(c) and reg. 1.248-1(c) and relevant examples.