Can I Make an S-Corp Election for My Side Business That Started in May 2023?

The S-Corp election timing depends on when your LLC was established, not when you started your business activities. For an S-Corp election to be effective for the entire 2023 tax year, it would need to have been filed within 2 months and 15 days from the LLC formation date OR within 2 months and 15 days from the beginning of the tax year (for pre-existing entities). Since you just formed your LLC recently in 2024, you've missed the window for a retroactive 2023 S-Corp election. However, you do have options: 1) You can file Form 2553 now to have S-Corp status for 2024 going forward, or 2) You could potentially file for late election relief using the "reasonable cause" provisions, though this is more complicated and less certain. For your 2023 taxes, you'll need to report your freelance income as self-employment income on Schedule C. Definitely file for that extension (Form 4868) to give yourself more time!

Hey, I was in a similar situation last year with my consulting business. I tried doing all the research myself and got super confused about the S-Corp timing rules. Finally gave up and used https://taxr.ai to analyze my situation. Uploaded my LLC formation docs and initial invoices. The system actually spelled out my options clearly including the exact timeline for S-Corp elections based on my specific formation date. Saved me from making a big mistake with retroactive elections - turns out I couldn't do it either. Their summary showed me what I'd need to document for a reasonable cause request, but also calculated the actual tax benefit I'd get (which was smaller than I thought for year 1). Helped me decide it wasn't worth the hassle for backdating and just focus on getting it right going forward. Much easier than trying to piece together IRS regulations myself!

I actually just tried taxr.ai after seeing the recommendation here. Holy crap - I was in the same boat (started business Oct 2023, formed LLC in January). The analysis made it super clear that I couldn't backdate my S-Corp election for 2023 but gave me the exact deadline for making it effective for 2024 (which was coming up soon!). The best part was seeing the actual dollar amount I'd save with an S-Corp based on my income - turns out it wasn't even worth it for me until my business grows more! Saved me from doing a ton of unnecessary paperwork and quarterly filings. The penalty calculator for missed deadlines was eye-opening too. Gonna stick with Schedule C for now and reassess next year. Really clear explanations without the accounting jargon.

If you're planning to call the IRS about this S-Corp election situation - good luck getting through! I've been trying for THREE WEEKS to talk to someone about my late S-Corp election. Keep getting disconnected or told the wait time is 2+ hours. Absolutely ridiculous. Finally, I used https://claimyr.com to get through. You can see how it works here: https://youtu.be/_kiP6q8DX5c - they wait on hold with the IRS for you then call you when an agent is on the line. Got connected in about an hour (while I was working on other stuff) and the IRS agent was actually super helpful about my S-Corp election options. She walked me through the late filing relief requirements and what documentation I needed.

Ok I need to apologize to Profile 19 - I was absolutely wrong about Claimyr. After another frustrating day of trying to reach the IRS about my late S-Corp election (got disconnected TWICE after 40+ minute holds), I gave in and tried the service. It actually worked exactly as described. I entered my info, and about 50 minutes later got a call connecting me directly to an IRS agent in the business tax department. The agent confirmed what others here said - I missed the window for 2023 S-Corp election but could file for 2024. She also explained exactly what documentation I'd need if I wanted to attempt a reasonable cause claim (though she warned approval wasn't guaranteed). Saved me hours of frustration and I finally got a definitive answer from the IRS themselves. Sometimes you have to admit when you're wrong, and I was definitely wrong about this service!

For your situation, filing as a sole proprietor for 2023 might not be terrible. You should definitely get an extension using Form 4868 ASAP though! That'll give you until October 15, 2024 to file. Just remember the extension is for filing paperwork, not for paying - you still need to estimate and pay what you owe by the regular deadline to avoid penalties. Once you get an accountant, they can help you decide if the S-Corp makes sense for 2024. Generally, the rule of thumb is that S-Corps start saving you money when your business profit is around $40k+ annually because of the self-employment tax savings. Below that, the extra compliance costs might outweigh the benefits.

I went through this EXACT scenario but back in 2022. Honestly, just file an extension right now! Not worth stressing over the S-Corp issue for 2023 - it's too late to use it for last year. Just make sure you're set up correctly for 2024. Here's what I wish someone told me: the S-Corp election is really only worth it once you're making consistent profit. My accountant said rule of thumb is $40k+ profit before the savings outweigh the hassle and extra costs. The first year I spent more money on payroll services, extra tax filings, and accountant fees than I saved in SE taxes!

Just wanted to echo what others have said - you definitely missed the window for 2023 S-Corp election since your LLC was formed in 2024. The IRS is pretty strict about those timing rules being based on entity formation date, not when you started business activities. That said, don't stress too much about it! For a side business that started mid-year 2023, you're probably not missing out on huge tax savings anyway. The S-Corp election really shines when you have consistent higher profits. Definitely file that extension (Form 4868) ASAP to buy yourself time until October. And when you do meet with an accountant, have them run the numbers on whether S-Corp makes sense for 2024 based on your projected income. Sometimes the extra compliance costs and payroll requirements aren't worth it until you hit that $40k+ profit threshold that others mentioned. Good luck getting everything sorted out! The fact that you're thinking about tax optimization shows you're on the right track with your business growth.