Contact UsWhen liquidating (closing) a corp. that was always elected as Federal S corp, but previous NJ C corp, do the retained earnings from the NJ side when it was a C corp, have to be reported on the personal Federal return when distributed as dividends, or just for NJ? Business was incorporated in 2001 as S corp Federal but remained C corp in NJ till 2005 when the election was changed to S corp as well. Also, I am an US expat working overseas and I file NJ 1040NR since leaving the States 3 yrs ago. Thanks
I am a US expat living overseas. I file my taxes with no problems. However, in 2013 I have begun liquidating or closing out an S corp that I previously had. The corporation was formed for my medical practice in the States. The problem is this. The corporation was initially incorporated as an Federal S corp, but S status was not elected in NJ (an oversight on the part of the accountant who did it that is costing us to no end). Roughly around 2005, we elected S status in NJ. There were about $70,000 of retained earnings ( believe this was b/c of the difference in elections between FEd and State), that upon liquidation are being distributed as dividends. However, my business accountant says the dividends are only income for the NJ State return. My personal accountant says no and wants to put the income on our Federal return as well. I fear this may cause us to pay excess tax and or red flag us for audit. Neither wants to assume responsibility. Please help.
