Will using a bank account with old business Tax ID cause issues after switching to a corporation?

Would the OP be responsible for filing a tax return for the sole prop for 2023 even though it's technically inactive, since the bank account is still open and has transactions? I'm in a similar situation and just realized I might be messing up big time.

If there was actual business activity using the sole proprietorship in 2023 (meaning income was earned or business expenses were paid through that entity), then yes, you would need to file a Schedule C for that business activity on your personal tax return. Just having the bank account open by itself doesn't trigger a filing requirement, but any business transactions flowing through it would be attributed to the sole prop. This is why it's important to either update the account ownership information or be very clear about documenting transfers between entities so you can properly allocate income and expenses to the right business for tax purposes.

Did you need to provide them with both account statements? Like do they analyze everything together or just look at one account at a time?

How does this work with payroll though? Our situation is complex because of employees that were technically employed by the old company but now under the new one, but payroll was coming from both accounts during transition. Would that tool help with sorting that out?

Yes, I uploaded statements from both accounts. Their system actually works better when analyzing multiple accounts together because it helps identify transfers between accounts and patterns that might indicate business continuity or separation. For payroll situations, it absolutely helps with that. The system specifically flags employee payments and can help document which entity was the actual employer for which pay periods. It saved me when I had a similar situation where some employees were technically being paid from the wrong entity during our transition. The documentation it creates shows clear allocation of expenses which you can use to properly file your tax returns.

Are these IRS agents actually helpful though? Every time I've talked to them they just read from scripts and don't answer my actual questions. Did they give you specific advice on your situation?

Wait, you pay someone to wait on hold FOR you? That sounds like a scam. Why would the IRS talk to someone else on your behalf? How does this actually work?

The key is getting to the right department. I asked specifically for a business tax specialist who handles entity transitions. The first agent wasn't helpful, but they transferred me to someone who dealt with these issues regularly. They gave me specific documentation requirements and explained exactly what they look for during audits when businesses change entities. No, they don't talk to someone else on your behalf. The service just handles the hold time. They call the IRS, navigate the phone tree, wait on hold (which took 2.5 hours in my case), and then when an agent actually picks up, your phone rings and you're connected directly to the IRS agent. You do the actual talking - they just handle the ridiculous wait time. Your phone rings when a human actually answers.

That's really concerning - I hadn't even considered the self-employment tax angle. Did your brother have to pay that permanently or was he able to fix it somehow? We're talking potentially thousands in our case if that's true.

He eventually got it sorted out but it took filing an amended return and providing extensive documentation showing that the income was actually earned by the corporation, not the sole prop. He had to prove the corporate entity was legitimate and operational during that period. His accountant said that if you're going to leave both accounts open, you need a formal written agreement between your sole prop and corporation explaining any transfers between accounts (like a loan agreement or service contract). Otherwise the IRS might see it as you operating both businesses simultaneously or disregard the corporate structure entirely.

Happened to me too with Bank of America! Totally screwed up all my automatic payments and a client sent a $9k payment to the closed account that took months to recover. OP should definitely be proactive about this.

The worst part was BOA wouldn't accept my instructions about where to send the remaining balance. They just mailed a check to the business address on file, which had changed, so the check got returned and then sat in limbo for weeks. Complete disaster.

This is really comprehensive advice! I'm curious about the state franchise tax issue you mentioned - how would someone know if their state considers banking activity as evidence the entity is still operating? Is there a resource to check state-specific rules on this, or do you just have to call each state's tax department individually? I'm dealing with a multi-state situation and want to make sure I'm not creating problems in states where I might not even realize there are ongoing obligations.

Most state tax departments have this information buried in their business tax guides or entity dissolution procedures, but it's not always easy to find. I'd recommend starting with each state's Secretary of State website - they usually have guidance on what constitutes "doing business" in their state. For franchise taxes specifically, check the state's revenue department website. A few states I know off the top of my head: California considers any bank account activity as evidence of doing business, Texas looks at actual business transactions (not just account maintenance), and Delaware is pretty lenient about dormant accounts. But these rules change, so definitely verify current requirements. If you're dealing with multiple states, it might be worth hiring a multi-state tax specialist for a consultation. The cost of getting it wrong (ongoing minimum taxes, penalties, etc.) usually far exceeds the cost of getting professional advice upfront. Some states have minimum franchise taxes of $800+ per year that you'd be paying unnecessarily if they consider your sole prop still active.

Great question! Each state has different rules, but here are a few ways to check: 1) Most state tax departments have business entity search tools on their websites where you can look up your old sole prop and see if it shows as "active" or "inactive" 2) Check your state's Secretary of State business database - some states automatically mark sole props as inactive after a certain period of no filings, while others require you to formally dissolve them 3) For franchise taxes specifically, look at your state's tax department website under "business taxes" - they usually have charts showing what triggers minimum tax requirements 4) If you're in multiple states, the Federation of Tax Administrators website (taxadmin.org) has links to all state tax departments which can save you time For multi-state situations, I'd definitely recommend calling each state's business tax division. Most have dedicated lines for entity status questions and can tell you quickly if there are any outstanding obligations. It's worth the phone calls because some states (looking at you, California and New York) are particularly aggressive about going after businesses they think are still operating without proper filings. The key thing is that banking activity alone usually isn't enough to keep an entity "active" for tax purposes, but combined with other factors (like receiving business income) it definitely can be.

Most states have this information buried in their business tax code or franchise tax regulations, but it's not always easy to find. Your best bet is to check each state's Secretary of State website and look for their business entity dissolution/inactive status requirements. For example, Delaware considers any business activity (including banking transactions) as evidence of continued operation, while Nevada is more lenient and looks at whether you're actually conducting business operations. Texas falls somewhere in between - they care more about revenue generation than just account activity. A quicker approach might be to call the business tax departments in each state where you were registered and ask specifically: "If I have a dissolved sole proprietorship but the bank account is still open with occasional transactions, does that trigger any ongoing tax filing requirements?" Most state tax departments can give you a straight answer on this over the phone, and it's better to ask now than get surprised with back taxes later. You could also check with your CPA - they usually know the rules for states they regularly deal with, and can research the others if needed.

Great question about multi-state issues! Each state definitely handles this differently. Most states have their Secretary of State and Department of Revenue websites where you can find entity status requirements, but honestly the rules can be buried in regulations that aren't always clear. For a quick check, I'd start by looking up "[state name] dissolved entity banking activity" or "[state name] inactive business franchise tax" on each state's tax department website. Some states like Delaware and Nevada are pretty explicit about when banking activity keeps an entity "active" for tax purposes. If you can't find clear guidance online, calling the state tax departments is probably your best bet, but be prepared for potentially conflicting answers depending on who you talk to. You might also want to check with a multi-state tax specialist - they usually have experience with these nuances across different jurisdictions and can spot potential issues you might miss. The tricky part is that some states have "gotcha" rules where even minimal activity can trigger ongoing obligations, while others only care about actual business operations. Better to know now than get surprised later with back taxes and penalties!

Great question! Most states publish their entity dissolution and inactive status rules on their Secretary of State or Department of Revenue websites. For franchise taxes specifically, I'd check each state's tax department website - they usually have FAQs about what constitutes "doing business" in their state. A few states I know off the top of my head: California considers any bank account activity as potential evidence of doing business, Texas looks at revenue generation regardless of the account used, and Delaware focuses more on whether you're actually conducting operations. But these rules change, so definitely verify current requirements. For multi-state situations, you might want to consider hiring a service that specializes in multi-state compliance - they can do the research across all your states and give you a comprehensive report. It's usually cheaper than dealing with unexpected tax bills later. The National Association of Secretaries of State website also has links to all state business filing offices if you want to research directly.