Covert Single person llc to C Corp

[TreeFarmGuy]

Good afternoon 

I created a single person LLC in Feb with an EIN. Now after review it appears I may pay less taxes if I elect to file as a C Corp. What do I file to change my status and can I use Turbo Tax to accomplish this?

Thanks

[DavidD66 · Accepted solution]

To elect to be taxed as a corporation, you will need to file Form 8832, Entity Classification Election.  You can file as a C-corp using TurboTax business, and submit Form 8832 along with your return.  You will have to request a late election relief if you are trying to get C-corp status as of January 1, 2022.  For more information, see the instructions in IRS Form 8832.  Make sure that you are aware that while you may pay less income tax on the company's earnings, any distributions you take from the company will be dividends, reported on Form 1099-DIV and taxed as such.  

[Mike9241 · Accepted solution]

You should probably confer with a tax pro. an S-Corp could be better. with a C-Corp you have to take a reasonable salary just like with an S-Corp. remaining profits are taxed at the C-Corp level whereas with an S-Corp remaining profits are taxed to the shareholder. if there are losses with a C-Corp the shareholder gets no benefit whereas an S-Corp shareholder can deduct losses on their 1040 up to the extent of their basis. a C-corp can not accumulate unlimited profits to avoid paying dividends to the shareholder. once a certain level is reached the IRS can impose an accumulated earnings tax each and every year sufficient dividends aren't paid. I should have also mentioned a C-Corp does not get the 20% QBI deduction. whereas the K-1 profits from an eligible S-Corp business could get this deduction. so instead of paying taxes on 100% of the K-1 profits you pay taxes on only 80% if you qualify.