Closing Dormant Companies
Until fairly recently, you easily could form your corporate or LLC business (often in Nevada) and even get a separate tax number ID, and then allow it to just be idle. If a person didn't do any business, they did not need to file an annual tax return. In the past, lots of people did not file any tax returns for inactive entities.
This article is my opinion and is not, legal advice. I am a judgment expert, and not a lawyer. If you need a strategy to use or legal advice, you should contact a lawyer.
When the economy started to fall and the biggest clients for my consulting business closed, I then decided to shut down my class-C corporation. In my state, it cost almost $1,900 each year to keep my C-corporation going, primarily due to having to pay State taxes and paying my accountant to complete the company tax returns. When revenue is down, it is costly to keep corporations going.
In the good old days, our prospering economy let the IRS place their attention mostly on companies that made money. Lots of folks used to start corporations or LLCs, and then simply ignored them. Even when folks got a tax ID number for their LLC or company; when they never did any business, they did not file any tax returns; and in the past, the Internal Revenue Service left them alone.
That changed recently. For some time, the IRS has been charging a fine for failing to file tax returns. The fine charged varies with the type of entity is filing. In 2010, the IRS substantially increased their fines.
Public law 111-92, the "Section 16 of the Worker, Homeownership and Business Assistance Act of 2009" increased the fine for not filing partnership and S-corporation tax returns (LLCs taxed as S-corporations or partnerships). The late filing fine was raised from $89 for each partner or shareholder to $195 per shareholder or partner for every partial or full month, in which an entity-related tax return was not filed on time.
People owning a "dormant" business registered on the books for many years, are now getting hit with massive fines, even if their company did not earn a dollar. Sometimes they did not even open a checking account, but they or their attorney, or a web site ordered a tax ID number for their company, which means they now must file a tax returns on time or will owe the Internal Revenue Service money.
If you own an LLC, a C or S-corporation, limited partnership, or an irrevocable trust having a tax ID number; you must file a tax return for your tax ID number each year. It doesn't matter whether you owe any taxes or do any business; a tax return needs to be filed.
The IRS is very serious about their fees. The Internal Revenue Service has tripled the number of agents in the past few years, and they're now attempting to squeeze absolutely dime. There is absolutely no way to escape owing fines for those who do not file on time, even for people that can't afford to pay them.
When you own a dormant business-related entity, deal with it now. When you bring it up with the IRS first, the IRS might be willing to work with you to clean up your inactive tax-ID number entity situation.
About the Author
Mark Shapiro of http://www.JudgmentBuy.com - The easiest and fastest way to find the right expert to buy or recover your judgment.
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