My client just let me know that she has an S Corp and the FTB wants past due returns. But, for the last four years she has been filing as a sole proprietor. My choice is to keep the S Corp open (and report the business activity in the corporation starting in 2020) or to request Voluntary Administrative Dissolution.
Past due returns are 2016 to 2019.
Tax savings compared to a sole proprietorship are projected to be 1-2k per year.
Costs: Penalties will be owed for late filing and $800 will be due for each of the past years. Abatement can be used for the earliest year but a penalty of $200 per shareholder per month for 2017 will be very large.
Benefits: Tax Savings. But not a lot more than the $800 fee.
Is this how you would look at it? Can no activity returns for 2016-2019 be filed then pick up all activity in this dormant S Corp in 2020? That would be a flag in my mind.