The first of this year (09) we incorporated our small side business. We have been a sole propiorship for several years. I filled out the IRS form 2553 to switch/form the S-Corp, however just found out that the papers were not sent in. This means I am currently a C-Corp. I am being told it is too late to make this change for this coming tax returns.

This year has been extremely slow with the business. I am wondering how much this will affect us having to file under a C-Corp (Double Tax) vs. an S-Corp. The total amount made was $2,000 with approx. $5,000 in deductions. Also, we still have the fictitious name registered would it be best to just file as the sole-propiorship as we have done in past years and next year pick up as the S-Corp, since the amount made was so little or file as the corporation?

Thanks

Late S Elections are correctable to a limited degree. In reading your post it sounds like you should qualify for correcting this by making a late election under Revenue Procedure 2003-43. Since this is your first year and you have yet to file, I think you will find you probably meet all the requirements.

Prior to this Rev. Procedure, it was next to impossible to correct this situation. This is one of the rare cases where the IRS improved what was a bad situation.

You may want to get professional advice on this. Although the election to correct is not that difficult, if you make an error you may be stuck with a C corporation.

Is it an LLC?

Is it an LLC?

No. It is a Corporation. Small business...

What I am now wondering is since this year has been terrible for the side business, we only made $2,000 would the C-Corp tax rate be the 15% which would be the same tax rate as my personal income (Married Filling Joint Not Over $68,000 = 15% Rate)

So if this is correct then the S-Corp Tax Rate being passed down to personal income rate wouldn't really effect/benifit us for this year since they would both be 15% correct?