Do I need to file S-Corp Form 2553 every year for my LLC?

Thanks for explaining this! I'm in a similar situation but just started my LLC this year. Quick follow-up question - is there a deadline for filing the 2553 form for the first time? And what happens if I miss that deadline for the current tax year?

The deadline for filing Form 2553 is either: 1) No more than two months and 15 days after the beginning of the tax year the election is to take effect, or 2) At any time during the tax year preceding the tax year it is to take effect. If you miss the deadline, you can still request late election relief by following the procedures outlined in Revenue Procedure 2013-30. You'll need to explain that you had "reasonable cause" for filing late. Many small business owners qualify for this if they can show they intended to elect S-Corp status but weren't aware of the filing requirements.

That sounds helpful! Does it actually work with specific forms like 2553 or just general tax questions? I have a bunch of LLC paperwork I need to make sense of.

Idk, seems kinda sketchy to use AI for important tax stuff. How do you know it's giving accurate info that's up to date with current tax laws? The IRS changes things all the time.

It works with specific forms - you can actually upload your forms and it'll analyze them. I uploaded my LLC operating agreement and previous 1040-C and it pointed out things I hadn't even considered about my business structure. The information is current with 2024 tax laws. They update their system regularly with IRS publications and tax code changes. It's not making stuff up - it's referencing actual tax regulations but explaining them in ways that are easier to understand than IRS publications. I've cross-checked some answers with my accountant and they've been spot on.

How does that even work? Does it actually connect you with the IRS or is it some third-party service that just gives tax advice?

Sounds like a scam tbh. Why would anyone pay for something to call the IRS? Couldn't they just get your personal info or pretend to be the IRS? No thanks.

It actually connects you directly to the IRS. They use some tech that holds your place in the phone queue, and when an IRS agent picks up, they connect the call to your phone. You're talking directly with the IRS, not with any third party service representatives. No, it's not a scam - they don't have access to your personal info or tax details. They're just solving the "being on hold forever" problem. When the IRS agent comes on the line, you're the one talking to them directly. I was skeptical too but after wasting 3+ hours on multiple calls getting disconnected, it was totally worth it to finally get through and get my S-Corp question answered officially.

Thanks for mentioning the reasonable salary requirement. How do I determine what's considered "reasonable" for my industry? I've heard different percentages thrown around online.

There's no fixed percentage that's universally considered "reasonable" - it depends on your industry, location, experience, and what comparable positions would earn in your area. A good starting point is looking at Bureau of Labor Statistics data for similar positions in your region. The key is documentation - keep records of how you determined your salary, industry standard compensation, and your responsibilities/time commitment. A common mistake is taking too little salary and too much in distributions to avoid payroll taxes. This is exactly what triggers IRS scrutiny. As a general practice, many tax pros suggest your salary should be at least 40-60% of your business profit, but this varies widely by industry and circumstances.

S-Corp revocation usually happens when you break the eligibility rules. The most common reasons are having ineligible shareholders or creating a second class of stock accidentally through operating agreements. As long as YOU aren't a non-resident alien, you're fine doing work overseas. The rule is about who owns the shares, not where the work happens. I've had my S-Corp for 7 years working with international clients with no issues. If your status does get revoked, you generally can't re-elect for 5 years unless you get IRS permission (which is a pain). Most revocations happen because people don't understand the rules, not because the IRS is actively hunting for violations.

This is really helpful to hear from someone with actual experience! I'm curious about the IRS flagging you for the salary issue - did they audit you or just send a notice? And when you had to provide documentation, what kind of proof did they want to see? I'm trying to make sure I set up my payroll correctly from the start to avoid any issues down the road.

It wasn't a full audit - they sent what's called a "correspondence audit" letter asking specifically about my salary vs. distributions ratio. They wanted to see documentation like: job descriptions showing my responsibilities, comparable salary data from my industry/area, payroll records showing I was actually paying myself through proper payroll (with taxes withheld), and business records showing the work I was doing justified the salary. The key thing they looked for was that I could demonstrate I researched what similar positions pay and that my salary wasn't artificially low just to avoid payroll taxes. I used Bureau of Labor Statistics data and some industry salary surveys to justify my numbers. Took about 3 months to resolve but no penalties since I could show reasonable basis for my salary amount. My advice: set up proper payroll from day one (I use Gusto), document your salary research, and err on the side of slightly higher salary rather than risk looking like you're gaming the system.

This is exactly the confirmation I needed! Thank you for breaking it down so clearly. I was getting really stressed about potentially missing some annual filing requirement for the S-Corp election itself. One follow-up question - you mentioned the March 15th deadline for Form 1120-S. Is that a hard deadline or can you get an extension like with personal tax returns? I'm usually pretty organized with my taxes but want to know what my options are if something comes up. Also appreciate the reminder about keeping the approval letter safe. I have it in my business files but should probably scan a digital copy as backup.

You can definitely get an extension for Form 1120-S! Just like personal returns, you can file Form 7004 to get an automatic 6-month extension, which pushes the deadline from March 15th to September 15th. However, this is only an extension to file the return - if you owe any taxes, you still need to pay them by the original March 15th deadline to avoid penalties and interest. The good news is that most S-Corps don't owe corporate-level taxes since the income/losses pass through to the shareholders, so the extension usually works out fine. Just make sure you still issue your K-1 to yourself in a timely manner since you'll need it for your personal tax return. And yes, definitely scan that approval letter! I learned this lesson when my physical copy got damaged in a small office flood. Having digital backups of all your important business documents is a lifesaver.