we are hamstrung because we can't see the notice. if you could post the details, except for any info identifying the corp, that would help. if the corporation is on a fiscal year did it file form 8752, a tax would be computed but it's not reported on the 1120S. did you convert your C-Corporation to an S-Corporation? It might owe the B(uilt)I(n)G(ains) T(ax).
in 1986 Congress enacted the built-in gains tax (see Internal Revenue Code § 1374). In general, the built-in gains tax is a special tax imposed on an S corporation that was previously a C corporation. The tax applies with respect to appreciated assets that the corporation owns on the date it converts to an S corporation and sells within a prescribed number of years after the conversion. The built-in gains tax also applies to profit attributable to any assets received by an S corporation from a C corporation in certain nontaxable transactions. The built-in gains tax is imposed at the highest corporate rate, currently 35%. was the
there could be a passive income tax or LIFO recapture tax
These taxes can apply if the corporation was previously a C corporation or if the corporation engaged in a tax-free reorganization with a C corporation.
Excess net passive income tax. If the corporation has AE&P at the close of its tax year and has passive investment income for the tax year that is in excess of 25% of gross receipts, the corporation must figure its excess net passive income and pay tax on it. To make this determination, complete lines 1 through 3
and line 9 of the Excess Net Passive Income Tax Worksheet for Line 22a. If line 2 is greater than line 3 and the
corporation has taxable income (see the instructions for line 9 of the worksheet), it must pay the tax. Complete a separate statement using the format of lines 1 through 11 of the worksheet to figure the
tax. Enter the tax on line 22a, page 1,Form 1120-S, and attach the computation statement to Form 1120-S.
Reduce each item of passive investment income passed through to shareholders by its portion of any excess
net passive income tax reported on line 22a. See section 1366(f)(3).
LIFO recapture tax. The corporation may be liable for the additional tax due to LIFO recapture under Regulations section 1.1363-2 if:
• The corporation used the LIFO inventory pricing method for its last tax year as a C corporation, or
• A C corporation transferred LIFO inventory to the corporation in a nonrecognition transaction in which those assets were transferred basis property. The additional tax due to LIFO recapture is figured for the corporation's last tax year as a C corporation or for the tax year of the transfer, whichever applies.
See the Instructions for Form 1120 to figure the tax. The tax is paid in four equal installments. The C corporation must pay the first installment by the due date (not including extensions) of Form 1120 for the
corporation's last tax year as a C corporation or for the tax year of the transfer, whichever applies. The S
corporation must pay each of the remaining installments by the due date (not including extensions) of Form 1120-S for the 3 succeeding tax years. Include this year's installment in the total amount to be entered on line 22a. To the left of the total on line 22a, enter the installment amount and “LIFO tax.”
there are a couple of other reasons why an S-Corp would owe the IRS see instructions for page 1 lines 22b,c
other than above the corp could owe penalties and interest if it didn't timely file payroll tax returns or made payroll tax payments late.
other possibilities include the IRS computers being wacko or you answering a question incorrectly to make the IRS computers think it owes taxes when it doesn't. we can not see the return you filed.
