Can I count previous income as income for my new business?

[ethanbatista26]

I have been self employed since June of last year and recently I created an LLC that will be taxed as an S corp. Can my income made before the creation of the LLC be considered income of the LLC? All of this income is in the form of a 1099-NEC made out to me.

[pk]

@ethanbatista26 , generally NO.

(a) Income  in the tax year need to recognized in the year they were received.  Thus your 1099-NEC should have been included in your return for tax year 2023.

(b) Generally  an entity cannot have income prior to its existence -- however some expenses ( specifically  start-up costs ) may be recognized  before  the start of the business.  It is simpler to keep everything in the same tax year, if at all possible.

(c) 1099-NEC also attracts  SECA  ( Self-Employment Taxes   at 15.3% , equivalent to FICA on wages ) and this should have been included in your tax filing for tax year 2023.

Does this make sense ?

Is there more one of us can do for you ?

[VolvoGirl]

Do you mean the income you got in 2024 before you created the S corp?  

[Mike9241 · Accepted solution]

since there was no LLC/S-corp election for 2023, that income cannot be reported on as S-Corp return for 2023. Schedule C for 2023 would seem to be the appropriate form.   For 2024 there may be some wiggle room because there are provisions for allowing S-Corp status even if the election is filed late but we don't know what you requested as an effective date, whether the election was filed late or if you have reasonable cause if filing late (Question I in the 2553 - also read the info on the back of the form especially part IV. There was also entity classification form 8832 that should have been filed.

if you don't qualify, then income prior to the effective date of the S-Corp election would be reported on schedule C and the S-corp for the rest of the year. You may want to confer with a tax pro to get educated about S-Corps and to see if you qualify for late election relief if you want it. Also, they can inform you about the requirement to take a salary and file payroll tax returns. Other tax returns may also be required. Some states may treat you as an employee and thus require the "S-Corp" to have workmen's compensation insurance, others may treat the LLC as a non-corporate entity and thus not an employee for WC insurance purposes