Question: I need to dissolve s corp as the assets have been sold. No income has been taken in 2012. Been using service ( Paychex )since incorporation in 1998. There is an outstanding credit amount with bank under the corp name will that be a problem? Paying off monthly. Also, have CPA firm EideBailly doing our tax filing.

“No income has been taken in 2012. Been using service ( Paychex )since incorporation in 1998. There is an outstanding credit amount with bank under the corp name will that be a problem? Paying off monthly. “----->It is important to know how to dissolve a corporation correctly to minimize risks and liability. Fortunately, shutting down an S corporation doesn't have to be that much work. The S corp needs to file articles of dissolution with the secretary of state in the state where you formed the S corp. The S corp should divide up any remaining assets among the owners. Rules dictating dispersal of assets should be in the company bylaws that were drawn up when the corporation was formed. Any physical assets, such as buildings, land and equipment, must be liquidated before dispersing the proceeds.The S corp needs to notify creditors that the corporation is dissolving and pay off any outstanding debt. If the S corp cannot pay off all of the debt, it must declare bankruptcy. If cashflow is limited, you may have to liquidate assets to make sure everyone gets paid. If an asset's FMVexceeds its depreciated basis, you will unfortunately need to show a gain on the distribution of the asset to the shareholder on the final corporate tax return. For example, assume that you purchased a $3,000 laptop computer that you fully depreciated and then you distribute the laptop to yourself as shareholder, you need to book a gain on the distribution. The gain equals the FMV of the laptop. You don't want to distribute assets to shareholders if the assets' depreciated basis exceeds the fair market value. For assets carried at a book value in excess of FMV, you want to have the S corp sell the assets to generate the loss. Form 996 is the official IRS form that needs to be filed for an S corp dissolution and must be filed within 30 days of the decision to dissolution. The process for dissolving a corporation with the state varies from one state government to the next. Although you'll need to verify the process for your state, it typically includes Articles of Dissolution and other forms. At some point, the corporation will have to complete and file final federal and state tax return,1120S tax return. Even though income and losses flow through to individual shareholders, the S corp is still required to complete a tax return, including one for the year of its dissolution. However, each state might run a bit differently, so make sure to talk to a corporate lawyer from your state to make sure you are dissolving the S corp the best possible way.

Form 966 is required to be filed within 30 days of your filing of your s-corps domicile states notice of intent to dissolve and articles of dissolution(these are MN regs, check your states regs). 3 separate IRS agents had different answers to what to include. Use section 331 for line 10 for complete dissolution. Never heard or seen a penalty for missing the 30 day rule but I would attach a valid explanation. But the 966 NEEDS to be filed. A lawyer is not needed if you find a qualified tax accountant, either a CPA or EA, who has experience! In MN if you file the state Intent to Disolve and Articles of Dissolution yourself, and send by mail and not e-file, the fee is $35 each as oppossed to e-filing as the fees are $55 each. Summary: Check your state regs and file the state notices yourself, easy and could save you a lot. Find an experienced tax accountant who has prepared final 1120-S returns before. There are so many potential tax issues that I would never recommend trying this yourself. There are issues like informing all creditors, gain/loss on sale/disposition of assets, shareholder loans etc. and you REALLY do need a professional. Sorry attorneys, but in my opinion this is much more a tax issue than a legal issue and lawyer's fees can add up(I'm not saying they are not qualified). The final action is federal form 966 which you can attempt yourself but you should first find the right guy/gal, have a meeting and communicate everything and if the acct. is OK with you doing the 966, and you feel OK,AND you can save a few bucks then go for it. He/ she should review it ideally.As mentioned above the state's Articles of Dissolution(with one IRS agent) was OK to send with the 966 in place of any board meeting agreement or majority stockholder intent statement. Notarizing will never hurt. Also, if new acct. please bring past returns and depreciation schedules(if applicable) to your initial meeting. It is critical that your acct understands all aspects of what you want him/her to achieve. Good luck, research first then plan a course of action.
From an experienced EA who just PO'd attorneys and tax accts. alike but hey My joy in this business is helping.