When will you receive your refund? The answer depends on how you filed your return. The IRS should issue your refund check within six to eight weeks of filing a paper return.
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WALKING AWAY FROM YOUR CALIFORNIA CORPORATION
Many clients never formally dissolve their corporations because the business has become a money pit. They don’t want to spend the money to file bankruptcy or formally dissolved. They simply walk away.
These shareholders will subsequently receive a bill from the Franchise Tax Board (FTB) for the minimum tax, plus penalties and interest. If certain conditions are met, the FTB may NOT hold you personally liable for any taxes due.
This is based on a court case called the “Ralite” DECISION. If you meet the criteria set forth in this decision, the shareholder (NOT THE CORPORATION) is off the hook. Here is how the chain of events will occur:
YOU COULD HAVE TROUBLE IF ……..
If you decide to ditch the corporation and continue the business in a different manner, such as a self-employed person, you will have trouble using this court decision to protect you. According to California Tax Audit Manual Sect 3010.12 – sole proprietors may be held liable. This court case works ONLY IF YOU HAVE DISCONTINUED THIS BUSINESS – and not if you restarted it in a different format.
CAN YOU WALK AWAY FROM AN LLC?
Based on research from various tax journals, the answer is: possibly, probably, and maybe. There are NO court cases on point. But is seems that because the LLC has limited liability like a corporation, the “Ralite” decision MAY apply. Please be advised that while you have a legal right to apply Ralite,it should be your last resort. It may be easier to file the returns, put the unpaid tax on a payment plan, rather than fighting the FTB. Fees incurred with a CPA or lawyer can easily exceed the potential tax savings.