Hello again and thank you for your question.
As I noted above, because an S corp's profits/losses are taxed to its individual
shareholders, the result of your accountant's mis-reporting the stock
ownership was that instead of all of the profits/losses being taxed to
you, they were taxed partly to you and partly (30% in 1997, 70% in
1998 and 2000) to the other person.
Since the returns that your accountant filed did not correctly report
the stock ownership of your corporation, you need to amend the
incorrect returns that were filed for 2001, probably for 2000, and
possibly for 1997 1998. I say probably 2000 and possibly the earlier
years because there is a statute of limitations that generally
applies once a return is more than 3 years overdue (more than 6 years
if the error caused a person to omit more than 25% of the person's
income).
Period of limitation
1. You file your return on time - usually April
15.............................. 3 years
2. You do not report income that you should report, and it is more
than 25% of the income on your
return...................................... 6 years
3. You file a fraudulent tax
return.............................................. No limit
4. You do not file a return.
...................................................... No limit
5. You file a claim for a refund, or Form 1040X for Amended Return,
after you file your return.
.............................................. ...... 3 years, or
2 years after tax was paid
http://sbo.od.nih.gov/ResourceLibrary/ResourceLibraryLinks/SBGuideCD/sections/section11/basic/Basic%20Requirements11-11.htm
Normally you would ask the same accountant to do the amendments, and
in this case if the accountant is willing to admit the error you would
ask him or her to do the amended returns without charging you.
If you've totally lost confidence in the original accountant you may
want to hire somebody else to do the amended returns (maybe you should
forewarn your original accountant and ask him or her to pay for the
cost of correction).
Here's how to amend Form 1120S. You need to have your account fill
out the returns correctly, including schedule K-1, and check box F4
near the top of the first page to show that it's an amended return.
2001
http://www.irs.gov/pub/irs-01/f1120s.pdf
2000
http://www.irs.gov/pub/irs-00/f1120s.pdf
1998
http://www.irs.gov/pub/irs-98/f1120s.pdf
1997
http://www.irs.gov/pub/irs-97/f1120s.pdf
[Because] the amended return results in a change to income or the
distribution of income or other information provided to a shareholder,
an amended Schedule K-1 must also be filed and given to the
shareholder. Ensure that box D(2) is checked on each Schedule K-1 to
indicate that it is amended.
http://www.proseries.com/support/ty03/faqs/docs/10133.shtml
This is where the statutue of limitations is important. Even if you
and/or the other person would now have different income or loss
figures, once the statute of limitations runs it's too late to amend
your personal returns. I suggest that you have all of the amended
1120S returns prepared anyway as a way to bolster your case that the
accountant did it wrong, but you only use the K-1 and to actually
amend your personal return for the years that are open (2001 and
possibly 2000 if it's the 6-year statute or if you filed your personal
2000 return later than June, 2001 which would be within the 3-year
limit).
The reason I was interested to know if your company had a profit or a
loss was that if it was a profit, then the other person actually paid
you taxes for you! [but if it was a loss then they took a tax loss
that should have been yours].
That will take care of the tax issue.
As for as also legally changing/correcting the stock records, that's
something that you as the true sole shareholder can do yourself. Your
company has a certificate of incorporation (sometimes called a
charter) that it filed in its state of incorporation, and it probably
has by-laws. Although you or your lawyer should read these to be sure
that the correct procedure is followed, it is safe to assume that as
sole shareholder you can type up and sign a corporate "resolution by
consent of shareholder" to appoint yourself as sole director of the
corporation, and you can type up and sign a corporate "resolution by
consent of director" to appoint yourself as President and Treasurer
and Secretary (in some states you need a second person to be the
Secretary - - maybe your spouse or your lawyer or a trusted friend).
That same director's resolution should authorize and direct the
Secretary to issue a stock certificate to you on terms consistent with
the certificate of incorporation and by-laws evidencing that you are
the sole stockholder.
That should do it!
I should mention that as noted below, this answer is no substitute for
professional legal or tax advice. In fact, since you mention that
your lawyer has the tax returns, I suggest that you print out and show
this answer to your lawyer. I'd be interested to know what your
lawyer thinks of this answer.
Search terms used:
amend 1120S
2001 1120S
Thanks again for bringing us your question.
Sincerely,
Google Answers Researcher
Richard-ga |
