Sole Proprietorship to S-Corp: I am lost

[emuelles7]

I have a healthcare private-practice business. In December 2023, I filed Form 2553 with the IRS to change my sole-proprietorship to an S-Corp. My request was approved, and I received the approval letter from the IRS on 02/28/24, with a new EIN# assigned. I thought I was converted to the S-Corp and that I would be able to cancel the sole proprietorship, which I no longer want as a status.

As my business is a small healthcare business, I am paid by health insurance companies on a bi-weekly basis, and I receive multiple 1099-MISC from these payers for tax purposes. Here's the problem; I never updated every single health-insurance payer with the new tax ID#. Yes I know, this wasn't a good move. In fact, I shudder at the thought of how many accounts are out there that need to be updated with the new EIN# assigned for the S-Corp. It boils down to the fact that I will receive many 1099s for 2024 with my first EIN# and NOT the new EIN#.

How the heck do I handle the above?? I am so confused reading these help articles from the IRS and on tax websites.

-Will I need to file 2024 taxes as a Sole Proprietor again? 

-Is there a way to link the first tax ID# with the new S-Corp tax ID#?

-Can I file 2024 taxes as an S-Corp under my social security number instead of an EIN?

-Do you suppose I could get the payers to add the new EIN# with a backdated effective date of Jan 2024?

HELP!! THANK YOU!!!

[tagteam]

I am going to page Champ @Rick19744 for input, but note:

1) If you do file 2024 as a sole proprietor, you will also have to file an 1120-S for the corporation since a corporation is required to file regardless of whether or not it has income or expenses. 

2) You can always try to get corrected 1099s from your clients (possibly a long shot though).

3) You can also report the income that actually belongs to the corporation as a nominee on your individual income tax return (1040) and then report it on your 1120-S. This procedure involves reporting the income on your 1040 under your SSN (and then subtracting it out) and then issuing 1099s to your S corporation from you, as a sole proprietor. 

4) You cannot use your SSN on your 1120-S. 

[Rick19744]

A number of comments:

• First and foremost, you need to meet with a tax professional immediately.  Not only will this help you for the issues you have noted in your post, but to potentially address correspondence from the IRS that most likely will arrive.
• You don't mention the effective date requested for the S corp, but I assume you requested 1/1/2024?
• As an S corp active shareholder, you will (are) be required to take a reasonable wage and the S corp needs to wihhhold the applicable withholdings; and then file and remit the applicable withholdings. This is a hot issue with the IRS.
• You also have the responsibility of providing your "clients" (health insurance companies) with an updated W-9 that reflects the EIN of the S corporation.
• While I could provide my thoughts on how to move forward, I believe you need to address this with a one on one with a tax professional where you can have a discussion on various alternatives and the risks involved with each.  I would be skeptical that any of the health insurance companies will issue a new 1099 since you did not provide them with a timely updated W-9.
• I do recommend that when you do get paid, you review each company and send in an updated W-9 where applicable (immediately).
• Some states may require a copy of the IRS S corporation acceptance with the initial state tax return.
• Don't be pound foolish and penny wise with your fact situation.  Meet with a tax professional.

[Opus 17]

If the effective date of the S-corp is 1/1/24, then you report all the S-corp's income and expenses, regardless of tax paperwork.  You do NOT also file a schedule C as a sole prop.  The fact that some 1099s are issued in your personal SSN or prior EIN is not what controls how you file.   If you made the election as an S-corp, that's how you must file.  Getting the 1099s under a prior EIN may cause the IRS to send some automated notices related to your personal return, but you would reply with your explanation that all the income was properly reported under the S-corp.

[tagteam]

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@Opus 17 wrote:

If you made the election as an S-corp, that's how you must file.

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A return needs to be filed for the S corporation but which items of income and expense need to appear on it is an entirely different matter. There is more than one way to handle this scenario.

Further, rick19744 is correct; @emuelles7 needs to meet with a tax professional as soon as practicable.

[peach368]

Deleted.