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Dawn611
May 16, 2022
Question

Closing S Corp Question

  • May 16, 2022
  • 1 reply
  • 0 views

Hi there, I may know the answer, but I want to run it past somebody because I am not sure it is correct. Closing out single shareholder S-corp after 18 years. All assets except a vehicle are worthless, so I am "selling" those for zero. Using Quickbooks, I figured the sale of the vehicle, with about a $7k gain. Those transactions all look fine.

Last payroll to 15 employees was Mar 25, all payroll returns have been filed, and paid. except FUTA....cannot seem to be able to file that for 2022....but all tax was deposited. SUTA, worker's comp, all paid. Notified all of closing. W2s have been submitted via Business Services with SSA, and electronically filed with 2 states. I will print 2022 forms for employees. I have no debt except to myself, which leads to my questions. I know I am supposed to zero out the balance sheet and I need to file a final 1120S. I applied for an extension (form 7004) just in case something comes up. I still have a couple very small refunds coming from subscription services, and a few final expenses, all very small, so just anticipating. Right now...here is my balance sheet:

ASSETS

3151 - Cash in Bank

LIAB & EQUITY

324,277 - Note Payable to Shareholder (This is money I put in over the years - I realize in reading, I probably should have kept seperate the contributions and withdrawals), but they all went here. Side note: Always took a W2 salary.

1000 - Capital Stock

(309,783) - Retained Earnings

(12,343) Net Income YTD

3151 - TOTAL LIAB & EQUITY

If it makes any difference, I did report the shareholder loan amounts on that new Form 7203 for 2021. How do I zero out this balance sheet and is there going to be a huge taxable event here? I'm hoping that I can avoid that.

Thank you in advance!!

1 reply

MaryLandT
MaryLandT
May 17, 2022

Good day, Dawn.

 

You can create a journal entry to separate the contributions and withdrawals. Then, post them to the correct account.

 

If you aren't sure about the journal entry, you can find the date when your balance sheet went out of balance. Here's how: 

 

  1. Go to the Reports menu and select Company & Financials and then Balance Sheet Summary.
  2. Select Customize Report.
  3. On the Display tab, from the Dates ▼ drop-down, select All.
  4. Go to the Report Basis section. If your balance sheet is out of balance in accrual only, select Accrual. Otherwise, select Cash.
  5. In the Columns section, from the Display columns by ▼ drop-down, select Year.
    Select OK.
  6. Compare your Total Assets to Total Liabilities & Equity. Find when your balance sheet goes out of balance.

 

Once you find the year, follow the same steps to narrow down the exact date.

 

  1. Repeat steps 1 through 6 above. This time, from the Display columns by ▼ drop-down, select Month.
  2. After you find the month, follow steps 1 through 6 again. Now, select Week.
  3. And finally, once you find the week, repeat the steps again. This time, select Day.
  4. Now that you have the date your report went out of balance, continue to step 3.

 

Once done, find transactions that are making your balance sheet out of balance. To continue with the process, please browse this article and follow steps 3 to 5: Learn how to fix your balance sheet when it’s out of balance in QuickBooks Desktop. 

 

About your FUTA returns, you can go back to us this January 2023. Then, ask for your annual payroll forms so you can file your year-end taxes.

 

Upon sharing this, I still recommend discussing this issue to your accountant. They can provide specific instructions to zero out your balance sheet and make sure your transactions are correctly recorded on your books. If you don’t have one, we can help you find an accountant.

 

Let me know if you have additional questions by commenting below. I'll be right here to provide the information that you need.

D
Dawn611Author
May 17, 2022

Thanks for replying Mary,

The balance sheet is balanced, though. Assets equal liabilities and equity. I guess my biggest issue is can I do journal entry between my loan from shareholder and retained earnings. Trying to zero out to close permanently.

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