Converting LLC to S Corp - Is it too late for 2024 tax year?

Thank you so much for the glimmer of hope! What exactly qualifies as "reasonable cause"? Would saying we weren't aware of the tax benefits until our accountant returned from vacation be sufficient? Also, if we get approved, would we need to file amended returns for any quarterly estimated payments we've already made this year?

Reasonable cause often includes situations where you weren't aware of the filing requirement or had incorrect professional advice, so your scenario about the accountant being unavailable could qualify. The IRS generally looks for genuine mistakes rather than intentional delay. For your quarterly payments question, if your late S Corporation election is accepted, you would potentially need to adjust your estimated tax payments. S Corporation profits flow through to your personal return, while employment taxes would be handled differently than with an LLC. Your accountant can help recalculate what you've paid versus what you should have paid under S Corp status to determine if adjustments are needed.

Does taxr.ai actually help with filing the forms or just tell you what you should do? I'm in a similar boat where I missed deadlines and I'm trying to figure out if they just give advice or actually help with the paperwork.

I'm skeptical about these AI tax tools. How accurate is it really? Seems like business entity selection involves a lot of factors specific to your situation that an algorithm might miss. Did you have any issues with the recommendations?

They don't file the forms for you, but they provide detailed instructions and templates that make it much easier. In my case, they generated a custom reasonable cause letter and step-by-step instructions for completing Form 2553 correctly. Their accuracy has been solid in my experience. The system actually asks detailed questions about your business income, expenses, and personal tax situation before making recommendations. It showed me side-by-side comparisons of LLC vs S Corp with my actual numbers, and identified the exact payroll/dividend split that would optimize my taxes without raising audit flags.

Wait, how does this actually work? The IRS phone lines are notoriously impossible to get through. Are they just auto-dialing or something until they get a spot in the queue?

Sounds scammy tbh. Why would you pay for something you can do yourself for free? The IRS eventually answers if you keep calling. Probably just taking advantage of impatient people willing to pay for convenience.

It uses a combination of technology to navigate the IRS phone trees and hold queue more efficiently than a person can. It's not just auto-dialing - their system knows exactly which prompts to select based on your specific situation and optimizes the time of day to call. It's definitely something you could do yourself for free if you have unlimited time and patience. But after spending 12+ hours across multiple days trying to reach someone, the time savings was absolutely worth it to me. For time-sensitive issues like late elections where you need answers quickly, waiting weeks isn't always practical, especially when your tax liability is potentially thousands higher while you wait.

That's interesting! I never heard of that approach. Is that completely legitimate with the IRS? And would there be any downsides to doing it this way versus the relief procedure mentioned above?

It's a legitimate strategy that works in certain situations, but it doesn't bypass all timing rules. The Form 8832 election to be treated as a C Corporation can be made at any time and can be effective up to 75 days prior to the filing date or up to 12 months after the filing date. The potential downside is that you'll need to meet the S Corporation election deadlines that apply to newly formed corporations (generally within 2 months and 15 days after the effective date of the C Corporation election). You also need to ensure you don't inadvertently create a short C Corporation tax period that could have tax consequences. Definitely consult with your tax professional before attempting this route to make sure it applies to your specific situation.

What's considered "reasonable" though? My accountant said 60% salary/40% distributions but my business partner's accountant said we could do 40% salary/60% distributions. There's no clear rule!