I filed for S-Corp status in mid-2023, retroactive to 1/1/2023. My LLC is a single-member, no employees except for me. I got S-Corp approval backdated to 1/1/2023. I then filed my first 941 Employer Federal Tax on 1/15/2024 for the 4th quarter of 2023 since it was the only quarter with payroll in 2023 due to the late S-Corp approval. In Spring 2024, my accountant said they were extending the filing for my corporate and personal returns. Both returns were filed before the October 15, 2024 extended deadline with no money owed.
My LLC received a notice in September 2024 from the IRS that they received my 940 FUTA return, but there was a problem reading page 2. I notified my accountant, and they sent the 940 again to the IRS.
In October 2024, my LLC received a CP162A notice for failure to file the S-Corp return on time with a penalty of over $1,400 due within 30 days. I informed my accountant, and they said the issue was with the IRS not matching their extension with my corporate EIN#. They promised to contact the IRS to fix it and remove the penalty.
At the end of November 2024, I received a certified letter from the IRS (CP504B) saying that since I didn’t pay the penalty from October within 30 days, I must pay by the end of December or they may seize property or rights. My accountant assured me not to worry and said it’s common for newly filed S-Corps.
The letter suggested calling if I disagreed. I called the IRS and spoke with a friendly agent who said they had no record of the 1120-S for 2023 being filed. I explained the accountant’s extension, and the agent put me on hold. When they returned, they said another department was working on resolving the issue with the extension. The agent offered a payment plan, but my accountant advised against it since it could be hard to get the money back.
Advice? Should I go for the installment plan? My accountant says I don’t really owe a penalty; it’s just a glitch with the IRS not recognizing the extension and the returns filed on time. They said the threatening notices were just automated messages meant to scare me, but everything will be sorted out.
Blaze said:
Do you trust your accountant? This all sounds normal to me. You hired an expert for a reason. Let them handle it.
I trust the accountant, but my wife is worried, especially after having to sign for the certified letter threatening property seizure. I’m wondering if the installment plan would stop the threatening letters. I also worry, ‘what if they do seize my property? What if this drags on for months and I could have stopped it by making a payment plan?’
@Hayden
Ask your accountant to call the IRS with your authorization (POA form) and request a 60-90 day extension to respond to the notice. That will give everyone more time to figure this out.
The IRS moves slowly, sometimes not acting for months. If your accountant is submitting letters, it could take time for them to process. Meanwhile, the IRS will keep sending automated notices. Have your accountant sign a 2848 or 8821 form and call the IRS on your behalf to put a hold on the notices.
This is normal. Any S-Corp election (Form 2553) takes time, and you’ll get several reminders from the IRS. If you trust your accountant, just let them handle it.
@Hayden
Did you file the BOI (Beneficial Ownership Information report)? It’s due by the end of this year. And 9/15 was the due date for the S-Corp return.
The accountant has given reasonable advice. Even if the return wasn’t filed on time, the penalty could likely be removed as long as your personal returns were filed correctly. If the penalty is removed, any interest will also be waived. I wouldn’t recommend the payment plan, though; it’s hard to get the money back once the IRS has it.
Tell your wife an online CPA says she needs to relax, or you could lose a couple grand.
I don’t understand how the IRS mismatched your EIN or has no record of your S-Corp return. If the return was filed electronically, your accountant should have received an acknowledgment number. Was the return filed electronically? If so, ask your accountant for those acknowledgment numbers or rejection codes.
