How do you change from a S corp to a C corp on Turbo Tax Business 2018?

[tagteam · Accepted solution]

If you are using TurboTax Business, you will have to file a final 1120-S for the S corporation and an 1120 for the C corporation (i.e., you cannot simply file an 1120 or some type of form for the conversion).

The conversion from an S corporation to a C corporation is a process (there is a procedure) and professional tax and legal guidance is highly recommended.

[Anonymous]

have you file an election to terminate or did one of the automatic termination conditions occur?

AUTOMATIC

A) no longer qualified to be s corp -fail IRC section 1361(b)

1361(b) Small business corporation
(1) In general for purposes of this subchapter, the term “small business corporation” means a domestic corporation which is not an ineligible corporation and which does not—
(A) have more than 100 shareholders,
(B) have as a shareholder a person (other than an estate, a trust described in subsection (c)(2), or an organization described in subsection (c)(6)) who is not an individual,
(C) have a nonresident alien as a shareholder, and
(D) have more than 1 class of stock.
(2) Ineligible corporation definedFor purposes of paragraph (1), the term “ineligible corporation” means any corporation which is—
(A) a financial institution which uses the reserve method of accounting for bad debts described in section 585,
(B) an insurance company subject to tax under subchapter L, or
(C) a DISC or former DISC.
(3) Treatment of certain wholly owned subsidiaries
(A) In generalExcept as provided in regulations prescribed by the Secretary, for purposes of this title—
(i) a corporation which is a qualified subchapter S subsidiary shall not be treated as a separate corporation, and
(ii) all assets, liabilities, and items of income, deduction, and credit of a qualified subchapter S subsidiary shall be treated as assets, liabilities, and such items (as the case may be) of the S corporation.

B) has c corp earnings and profits and has too much passive income for 3 consecutive years

NON AUTOMATIC

 The election is revoked. An election can be revoked only with the consent of shareholders who, at the time the revocation is made, hold more than 50% of the number of issued and outstanding shares of stock (including nonvoting stock). The revocation can specify an effective revocation date that is on or after the day the revocation is filed. If no date is specified, the revocation is effective at the start of the tax year if the revocation is made on or before the 15th day of the 3rd month of that tax year.     If no date is specified and the revocation is made after the 15th day of the 3rd month of the tax year, the revocation is effective at the start of the next tax year.
To revoke the election, the corporation must file a statement with the appropriate service center listed under Where To File in the Instructions for Form 2553. In the statement, the corporation must notify the
IRS that it is revoking its election to be an S corporation. The statement must be signed by each shareholder who consents to the revocation and contain the information required by Regulations
section 1.1362-6(a)(3).

you should also consult a tax pro.  there may be adverse tax consequences when you convert.  

also  why do you want to convert?  Under certain circumstances a C-corp is the worst possible tax structure.      again seek the advice of a pro.        

[Dianne Bergemann]

The IRS never excepted my S corporation and I have to re-file it as a C Corp. I have used TurboTax and QuickBooks and if I go in and change my corporate status from an S Corp. to a C Corp. well that delete the information in my QuickBooks accounting

[Critter]

You MUST start the return again using the correct corp option....what you already did is useless and cannot be converted. 

[Rick19744]

I will also advocate getting some professional input on any change.

Not good to just knee jerk because the tax rate "appears" lower.  Keep in mind that tax laws change annually.

Additionally, long term, the S corp builds up basis in your investment which could lead to less tax upon disposition.  Also the ability to take out tax-free distributions to the extent you have basis AND are taking a reasonable salary.

[Carl]

You don't "change" anything. The S-Corp is closed permanently and forever with a "final" 1120-S and final K-1's are issued to all owners. Then a "new" business that is a C-Corp is opened one day after the S-Corp is closed.

Now you "REALLY" have to know what you're doing to get dates right too. Otherwise you'll have major, major, major issues with transferring assets and inventory.

[hentaxx]

Hello all,

I have some questions about the TurboTax Business Desktop Cd for C and S corporations.

1. Can I manually fill out the tax forms (forms mode) and e-file using the software or is it just a question and answer format (interview mode only) that auto generates the federal and state forms?

2. Is there an option to upload pdf forms to TurboTax and just use the e-file option?

3. You must buy the version for the year you want to use right? So for the 2019 returns, you must buy the 2019 version and so on. There's only one year's version per purchase, is that right?

4. Are the state forms already inside the business Cd or do I download them after I buy the add-on?

5. How do I e-file the forms once they are completed in the desktop software?

6. Has anyone bought TurboTax Business on Ebay? Are those genuine copies safe to use? They are allot cheaper than from Intuit or Amazon.

Thank you in advance.

[Rick19744]

To address some of your questions:

1. Yes, you need to purchase a specific year software in order to prepare that years tax return.  So in your case, that would be 2019.
2. I would recommend you follow the interview process.  This is a safer bet that nothing is missed in the preparation process.
3. When following the interview process, TT will provide assistance in the efiling.
4. I am an advocate for "if it sounds too good to be true, it generally is".  So for me, I would be willing to spend the $$ to purchase the product from a reliable source such as TT.  This ensures you get what you pay for.  Just to be clear, I am in no way affiliated with TT.
5. The TT site for TT Business indicates that the state product is additional. 

[tagteam]

@Rick19744's answer is spot on. 

One item to note is that TurboTax Business does not support all states with respect to the different modules (e.g., S and C corporations, trusts/estates, etc.).

The list of states that are not supported can be found at the link below.

https://ttlc.intuit.com/community/state-taxes/help/which-states-are-not-supported-in-turbotax-busine...

[hentaxx]

Thank you for the replies.

Does TurboTax Business 2019 desktop support e-filing for 2019 S or C Corp 1120s and associated state forms or has the deadline passed? I've read in other posts that you can't always e-file prior year forms with turbotax.

If that's the case, are there any workarounds? Has anyone used alternative providers to e-file prior year 1120's and associated state forms?

Thank you.

[tagteam]

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@hentaxx wrote:

If that's the case, are there any workarounds? Has anyone used alternative providers to e-file prior year 1120's and associated state forms?

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Current year returns only. There are no workarounds beyond using a registered tax preparer who uses certain professional tax preparation software.

[hentaxx]

If using the professional tax preparer software, does one need to know the 5 digit self-select pin from the prior  year's form 8879C to successfully efile the 1120?

What do you do if you can't remember the old 5 digit pin you entered? Can you select a new 5 digit pin or will the return be rejected? If it's rejected without the correct last year's pin, what is the solution?

Thank you.

[ErnieS0]

@hentaxx No you do not need to know the five digit self-select pin from the prior year’s Form 8879C to successfully e-file the 1120 in TurboTax.

TurboTax does not support Form 8879C, so you will e-file by

• Filling out Form 8453-C within the program, 
• Downloading the form, 
• Signing the paper copy, and
• Uploading via a scan or picture back into TurboTax to e-file.