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stech
Level 3

When to elect S Corp status? am I too late

I am a single member LLC since 2018. Can I elect to file as S Corp for 2020? or 2021 (next year). Tomorrow is mar 15, can I efile Form 2553 or paper filing on that day is enough?

8 Replies
Mike9241
Level 14

When to elect S Corp status? am I too late

3/15 is the last day to file for 2020.  the IRS will notify you that either it was accepted for 2020 or will be effective next year. can be mailed or faxed see filing instruction on page 3 of the instructions for the form. 

https://www.irs.gov/pub/irs-pdf/i2553.pdf 

 

some may point out that a late election can be filed but there must be a reasonable reason why it was filed late. 

stech
Level 3

When to elect S Corp status? am I too late

If I choose S Corp for 2020, & they accept. But I know, I didn't pay any taxes related to W2 to my self. Thats the only reason I want to elect S Corp, to pay myself salary & reduce SE tax.

 

 

DavidD66
Expert Alumni

When to elect S Corp status? am I too late

If you want to elect S-Corp status for 2020, technically you are too late.  The instructions say to Complete and file Form 2553:

  • No more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or

  • At any time during the tax year preceding the tax year it is to take effect.

 

However, you can request relief and ask for S-Corp status for 2020.  See Relief for a Late S Corporation Election Filed By an Entity Eligible To Elect To Be Treated as a Corporation in:

 

Instructions for Form 2553

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stech
Level 3

When to elect S Corp status? am I too late

Doesn't this mean Mar 15? 

We plan not to file 2020 taxes yet. it will be later in July. so I can wait for late reply from IRS. which we know would take super long due to covid. 

 

With S Corp, we file 1120S? For past few years, we just file Sch C as it as just LLC

ColeenD3
Expert Alumni

When to elect S Corp status? am I too late

As David said:

 

 

If you want to elect S-Corp status for 2020, technically you are too late.  The instructions say to Complete and file Form 2553:

  • No more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or

  • At any time during the tax year preceding the tax year it is to take effect.

That date is February 15.

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AmeliesUncle
Level 11

When to elect S Corp status? am I too late


@stech wrote:

 Thats the only reason I want to elect S Corp, to pay myself salary & reduce SE tax.


Please do NOT make such a big decision without the assistance of a tax professional.  For example, if you are a service-business and you are the only one working for the business, almost all of your profit should be salary so you may not be saving any Social Security and Medicare taxes.  Besides the additional work and additional tax returns, it may not save any money (and paying less Social Security tax usually means smaller a retirement when are start collecting Social Security).

 

You were not on salary in 2020, so you don't qualify for the late election to be taxed as a S-corporation for 2020.

 

The due date for making that election is today (March 15th).

stech
Level 3

When to elect S Corp status? am I too late

I am a day trader. 

 

If I can't elect for S Corp for 2020, I would still like to elect S Corp for 2021 taxes. I expect to earn $50K capital gain this year. 

 

Other business I have is used car dealership. that would make sense to pay myself salary?

JeffreyR77
Expert Alumni

When to elect S Corp status? am I too late

You can incorporate your day trading business and elect S-Corporation status with Form 2553. 

 

For 2021 you want to do this quickly and indicate retroactive to the beginning of the year. 

 

You will have to pay yourself a reasonable compensation (payroll with tax withholding) from the day trader S-Corporation so plan accordingly.   

 

You also can form a separate S-Corp for your used car dealership. 

 

You also will have to pay yourself reasonable compensation (payroll) from that S-Corp as well. 

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