Confused about Form 2553: Should I use Rev. Proc. 2013-30 or wait to elect S-corp for 2024?

You still have options for 2023, but you'll need to act quickly. Rev. Proc. 2013-30 does provide relief for late S-corp elections. Since we're still in 2023, you can actually file Form 2553 within 3 years and 75 days of the date you want the S-corp status to be effective. For payroll, this is where it gets tricky for 2023. You'd need to establish a "reasonable salary" and run at least one payroll before year-end. Generally, with your income level, you'd want your salary to be somewhere around $80-100k annually, but since you'd only be establishing it for part of the year, you could prorate it. You'd need to register for payroll taxes, get a payroll service, and file all the appropriate quarterly forms. Is it worth it? It depends on the difference between self-employment tax on your full net income versus FICA taxes on your reasonable salary. At $230k, you could potentially save several thousand in taxes even for one month, but you'll have accounting costs, payroll service fees, and time spent setting it all up.

After struggling with almost the exact same S-corp election timing issue last year, I finally found a solution that saved me hours of frustration. I used https://taxr.ai to analyze my situation and got clear guidance on my late S-corp election options. The tool reviewed my specific circumstances and showed me exactly how to complete Form 2553 with the correct Rev. Proc. 2013-30 notations. What really helped was that it calculated my potential tax savings both ways (waiting vs. electing now) based on my actual numbers, so I could see if the hassle was worth it. It also generated a personalized checklist of everything I needed to do for payroll setup before year-end. Literally saved me from making several mistakes that would have caused problems with the IRS later.

Just wanted to update everyone - I took the advice about using taxr.ai and it was exactly what I needed! I was skeptical at first (as you can see from my earlier comment), but it actually provided me with detailed calculations showing I'd save about $7,800 by electing S-corp status for 2023 even with just December's income. The system created a customized guide for my situation and helped me properly fill out Form 2553 with the right Rev. Proc. 2013-30 language. It even generated a reasonable salary justification document based on market rates for my industry, which my accountant said would be really helpful if I ever get audited. I've now submitted my election and set up a simple payroll system for December. The whole process took about 3 hours of my time, which is worth it for the tax savings. Thanks to everyone here who pointed me in the right direction!

If you're still struggling to get a definitive answer from the IRS about your S-corp election timing options, I was in the same boat last month. After calling the IRS business line for THREE DAYS straight and never getting through, I finally tried https://claimyr.com to get past the IRS phone tree nightmares. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was honestly shocked when they called me back with an actual IRS agent on the line within 45 minutes! The agent walked me through the exact requirements for using Rev. Proc. 2013-30 for my situation and confirmed that my understanding of the reasonable cause statement was correct. Saved me so much stress since the deadline was approaching and I couldn't get a straight answer from anyone else.

I need to admit I was completely wrong about Claimyr in my previous comment. After struggling for another week trying to get through to the IRS about my S-corp election questions, I broke down and tried the service. Within about an hour, I got a call back with an actual IRS business specialist on the line! The agent confirmed that I could still use Rev. Proc. 2013-30 for my situation and explained exactly what documentation I needed to include. She even gave me tips on how to word my reasonable cause statement to improve my chances of approval. This was after I had spent literally DAYS trying to get through on my own with no success. For anyone in a similar situation with S-corp election timing questions, getting direct confirmation from the IRS saved me from making what could have been a costly mistake. Sometimes it's worth spending a little to save a lot of frustration and potential tax issues.

Something everyone seems to be overlooking - have you considered the increased costs of running an S-corp? You'll have: - Annual tax prep fees ($1000-2000 vs maybe $500 for Schedule C) - Payroll service ($50-100/month) - State filing fees (varies by state) - More complex bookkeeping With your income level, the math probably still works out in favor of S-corp, but don't just look at the tax savings in isolation. Also, setting up payroll for just Dec might be more hassle than it's worth. Personally, I'd just wait till 2024 and do it right from the beginning of the year.

Has anyone used the "Reasonable Cause Statement" approach when filing Form 2553 late? What kind of language actually works?? I'm in a similar spot and need to file under Rev. Proc. 2013-30 but worried about getting rejected.

I went through this exact same situation two years ago and can share what worked for me. With your income level at $230k, the S-corp election will likely save you significant money even for just one month - potentially $4-6k in self-employment tax savings. Here's what I'd recommend: File Form 2553 immediately using Rev. Proc. 2013-30 relief. For the reasonable cause statement, keep it straightforward - something like "Taxpayer was unaware of the election deadline and filing requirements but intended to elect S-corp status upon learning of the tax benefits." For payroll, you'll need to establish a reasonable salary for December. With your income, aim for around $7-8k for December (roughly $90-100k annualized). Yes, it's a hassle to set up payroll for one month, but the tax savings usually outweigh the setup costs. One thing others haven't mentioned - make sure you have adequate business bank account records showing clear separation between business income and personal draws. The IRS will want to see that you've been operating as a legitimate business entity. The key is acting quickly since you're already in December. Even if it feels rushed, the potential tax savings make it worthwhile for your income level.