Case Study: Misfiling of business entity
Misfiling of Business Entity Type & Accounting Error
New business owner was referred for CPA services. They owned an S Corporation and was working with an accounting service company to do their bookkeeping. Upon reviewing the tax filings and accounting activity, there was a discrepancy which overstated the business by $96k. This amount was the total payroll which was never reported on the financials nor the business tax return. Additionally, we were unable to verify that the business was established as making an election to be treated as a S-Corporation for income tax purposes.
Outcome: We requested an election to be treated as an S-Corporation citing an exemption for late filing. We amended the business tax return that resulted in a reduction of $22,000 in Federal taxes and $8,000 in state taxes.
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