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bwwpe
Level 1

I want to keep my S-corp "alive" but dormant for 2 to 3 years. Any problem provided I file zero returns each year and keep my state status up to date?

I have operated my sole shareholder S-corp for engineering consulting since 2006 and fully retired at end of 2019. I filed a zero return for 2020 and am again filing a zero return for 2021. Is there any restriction or problem in keeping the s-corp dormant for another year or two, continuing to file zero returns, until I'm sure I wont need to resume work activity again? The firm's name still has recognition value in my specialized field so I do not want it to let it die until I am sure I can stay retired. I would eventually file a final return at some point to provide a final Balance Sheet and reconciliation of stock basis, disposition of assets (already 100% depreciated via Sect 179) etc.  I have notified IRS and my state employment commission that payroll is suspended. 

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Accepted Solutions
Mike9241
Level 15

I want to keep my S-corp "alive" but dormant for 2 to 3 years. Any problem provided I file zero returns each year and keep my state status up to date?

The IRS doesn't care as long as you file and neither would the state if there's an income tax return filing requirement. make sure to pay and file any franchise tax returns and/or annual reports (this varies by state but failure after a period of time usually results in the incorporation being canceled. there may also be certain things that can no longer be done from a legal standpoint)

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4 Replies
Mike9241
Level 15

I want to keep my S-corp "alive" but dormant for 2 to 3 years. Any problem provided I file zero returns each year and keep my state status up to date?

The IRS doesn't care as long as you file and neither would the state if there's an income tax return filing requirement. make sure to pay and file any franchise tax returns and/or annual reports (this varies by state but failure after a period of time usually results in the incorporation being canceled. there may also be certain things that can no longer be done from a legal standpoint)

bwwpe
Level 1

I want to keep my S-corp "alive" but dormant for 2 to 3 years. Any problem provided I file zero returns each year and keep my state status up to date?

Sincere thanks for the quick answer!  The program still makes a lot of pages and of course a K-1 with all zeros which I enter into my personal return.  On my way to the post office today. 

 

Last year, I learned my lesson (WORTH SHARING) about why to ALWAYS send via Certified Mail with Return Receipt. Before March 15, I mailed the request for automatic extension of time to file my 2020 1120s return, but just sent it regular 1st Class mail, and made sure the clerk postmarked it manually just to be sure the postmark was legible. Silly me.  Well, after I filed my "zero" return in September 2021 (timely and via Certified RR Mail) I got a notice with $800+ penalty for filing late! I called IRS and there was no record of IRS having received my request for extension of time to file, and since I could not prove it had been mailed/received, the agent said I could use my One-Time pass to have the penalty waived since I had an otherwise perfect filing record for 17 years. Wow, how generous of them! Now, my one-time pass is used up. I assume it would be a mistake to protest this, right?

 

Critter-3
Level 15

I want to keep my S-corp "alive" but dormant for 2 to 3 years. Any problem provided I file zero returns each year and keep my state status up to date?

Always efile all returns if possible. 

bwwpe
Level 1

I want to keep my S-corp "alive" but dormant for 2 to 3 years. Any problem provided I file zero returns each year and keep my state status up to date?

Critter 3 re: e-file: Nope! A few years back, there was a serious security breech whereby my e-filed tax return was pirated and someone collected my refund the following year using my information from the prior year return before I filed for the current year. The IRS was very slow to respond and held my refund money for nearly two years before finally releasing it to me. So that forever damaged my trust for e-file. I will now only file via USPS Certified Mail with Return Receipt. Too bad, because it is a slow, expensive pain to do that but it is also really a bummer when somewhere in the e-file system my info was stolen to defraud me and the IRS.

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