Your CPA is definitely confusing two different deadlines here! This is actually a really common mix-up that I see all the time. The March 2026 date they mentioned is when you'll FILE your 2025 S corp tax return (Form 1120S), but to actually ELECT S corp status for 2025, you need to file Form 2553 by March 15, 2025. If you wait until March 2026 to make the election, it would only be effective starting in 2026 - meaning you'd completely lose out on a full year of S corp tax benefits. Depending on your income level, this could easily cost you thousands in unnecessary self-employment taxes. You're absolutely right to be concerned about the salary and distribution setup. You cannot legitimately take S corp distributions until after you've filed the election. The proper sequence is: 1) File Form 2553 by March 15, 2025, 2) Set up payroll for reasonable salary, 3) Then take distributions beyond salary. I'd strongly recommend printing out the Form 2553 instructions and having a clarifying conversation with your CPA immediately. Show them the "2 months and 15 days" rule that's clearly stated in the IRS instructions. This is way too important financially to leave any room for confusion - trust your instincts on this timeline!

I've been following this thread closely as someone who just went through the S corp election process myself, and I want to emphasize how critical it is to get this timeline right. Your CPA is absolutely mixing up the election deadline with the tax filing deadline - this is unfortunately a very common and costly mistake. The March 15, 2025 deadline is NON-NEGOTIABLE for S corp status to apply to your entire 2025 tax year. If you miss this date, you're stuck waiting until 2026, which could cost you thousands in additional self-employment taxes depending on your business income. Here's what I learned from my experience: Start preparing NOW, not in March. You'll need to set up payroll systems, register for state payroll taxes, and have a clear plan for reasonable salary determination before you can properly operate as an S corp. I started this process in October for a January election and was glad I gave myself that much time. Most importantly, do NOT take any distributions until after you've filed Form 2553. Operating like an S corp before the election is official can create serious compliance issues with the IRS. I'd recommend scheduling an urgent meeting with your CPA this week, bringing the Form 2553 instructions, and asking them to explain exactly which March 2026 deadline they're referring to. Once you clarify this confusion, you'll realize you need to act much sooner than they initially told you. Trust your gut on this one - the timeline they gave you doesn't make sense because it's wrong.

Thanks for all the detailed advice in this thread! I'm dealing with a similar situation where my client filed their 2553 about 6 weeks after their state registration date. Reading through these responses, it sounds like the corrected Form 2553 approach is definitely the way to go. One follow-up question - has anyone had experience with how strict the IRS is about the timing of when you submit the correction? My client's situation happened in early 2024, so we're still well within the same tax year, but I'm wondering if there's an optimal window for filing the correction to avoid any potential scrutiny. Also, I'm curious about the processing times people have experienced recently. The 8-week timeframe mentioned earlier sounds reasonable, but I've heard IRS processing has been unpredictable lately. Any recent experiences would be helpful for setting client expectations!

This is exactly the kind of situation where having clear documentation from the start makes all the difference. I've handled several similar cases where clients filled out their own forms before bringing them to me, and the corrected 2553 approach has worked well every time. One thing I'd emphasize that hasn't been mentioned yet - make sure to keep detailed records of your client's business activities from day one. Bank account opening dates, first transactions, employee records, etc. The IRS may ask for documentation showing the client genuinely intended to operate as an S-corp from the business start date, especially if there's any significant gap between state registration and the original 2553 filing. Also, consider having your client sign an affidavit stating that the incorrect effective date on the original form was an inadvertent error and that they intended S-corp treatment from inception. This can be helpful supporting documentation if the IRS has any questions about the timeline or intent.

Just a quick tip - the Traditional IRA basis amount carries forward every year on Form 8606. Line 14 from one year becomes the starting point (Line 2) for the next year's form. Always keep copies of your previous 8606 forms or you'll have a nightmare trying to reconstruct your basis if the IRS ever questions it!

This is a great explanation of a really confusing topic! I had a similar recharacterization situation a few years ago and was totally lost until my CPA walked me through it. One thing I'd add for anyone reading this - make sure you understand the pro-rata rule if you have other Traditional IRAs with pre-tax money. The IRS doesn't let you pick and choose which dollars you convert first. If you have $10,000 in Traditional IRAs and $1,000 of that is basis, then any conversion will be 10% tax-free and 90% taxable, regardless of which account the money comes from. Also, keep detailed records of ALL your IRA transactions. I learned the hard way that even small discrepancies in your basis calculations can cause headaches years later when you're trying to figure out what happened.

One thing nobody's mentioned yet is that meal deduction rules can differ by business type! My wife has an LLC taxed as an S-Corp and we have completely different rules than when I had a single-member LLC. Also, the actual verbiage in your LLC operating agreement matters. If your wife's LLC operating agreement specifically mentions regular planning meetings as part of operations, you're in a much stronger position to defend those meal deductions. Might be worth having a tax attorney review your operating agreement to see if an amendment would help clarify and support these deductions going forward. The other question is how the LLC is taxed - is it a pass-through entity or does she file separate business returns? That can impact how these deductions are treated too.

Based on my experience with similar LLC situations, your spouse business meal deductions are in a gray area that requires very careful documentation. The IRS doesn't have specific rules prohibiting spouse-to-spouse business meals, but they scrutinize them heavily because they could easily be viewed as personal expenses disguised as business deductions. The key factors that make these deductions defensible are: 1) The meals have a clear business purpose that wouldn't exist without the LLC, 2) You maintain detailed records beyond just receipts (specific topics discussed, decisions made, action items), 3) The frequency is reasonable (occasional planning sessions, not regular dinners), and 4) The expenses are proportional to your business income. Given that your wife's LLC income is only 3-4% of household earnings, these deductions might fly under the radar, but that doesn't make them automatically legitimate. I'd recommend starting to document these meals more thoroughly going forward - keep a business diary with dates, specific article topics discussed, planning decisions made, and concrete outcomes from each meeting. The fact that two different accountants haven't flagged this suggests it's not obviously wrong, but it's still worth getting proper documentation in place to protect yourself if questions ever arise.

I went through this exact same situation two years ago and can confirm that you're not out of luck! The IRS does allow late filing of Form 3115 for 475(f) elections under certain circumstances. The key is that you made a good faith effort by filing the election statement with your return. You'll want to file Form 3115 with your 2024 return and include a detailed reasonable cause statement explaining why you missed the original deadline. Reference Revenue Procedure 2022-14 for automatic consent procedures. Make sure to emphasize that you properly made the election statement and are correcting the oversight as soon as you discovered it. The good news is that if accepted, you won't need to amend prior returns - the Form 3115 handles the accounting method change adjustments through Section 481(a). I'd recommend getting professional help to ensure everything is done correctly, but you definitely still have options to salvage your MTM election.

I went through a very similar situation last year and want to reassure you that it's not hopeless! I made my 475(f) election with my 2022 return but completely missed the Form 3115 requirement. I didn't discover this until I was preparing my 2023 taxes. I ended up filing Form 3115 with my 2023 return under the automatic consent procedures in Rev. Proc. 2022-14. The key was including a comprehensive reasonable cause statement that explained I had made the election in good faith but was unaware of the additional Form 3115 requirement. I emphasized that I was correcting the oversight immediately upon discovery. The IRS accepted my late filing without any issues. The Section 481(a) adjustment wasn't as scary as I thought it would be - it actually worked in my favor since I had some unrealized losses that reduced my taxable income for that year. My advice: don't panic, but do act quickly. File the Form 3115 with your 2024 return, include a detailed reasonable cause statement, and reference the appropriate revenue procedure. If your trading situation is complex, consider getting professional help, but many people have successfully resolved this exact issue. The IRS is generally reasonable when you show good faith effort to comply.