How to start an S-Corp for 2024 tax year - is it too late?

The good news is that you're not too late for 2024! To elect S-Corp status, you'll need to file Form 2553 with the IRS. For a new tax year, you need to file this form by the 15th day of the 3rd month of your tax year. So if your business runs on a calendar year (Jan-Dec), you'd need to file by March 15th, 2024. The main change with an S-Corp is that you'll need to pay yourself a "reasonable salary" as an employee of the company, which means running payroll (which you already do with Gusto, so that's great). The benefit comes from the fact that you only pay self-employment tax on your salary, not on distributions you take as the owner. For quarterly obligations, you'll still make estimated tax payments, but they'll be based on your salary and projected distributions. Your business will also need to file quarterly payroll forms (941s) and annual forms like W-2s, W-3s, and the 1120-S for the business itself. Rather than a monthly CPA, I'd recommend finding a tax professional who specializes in small business and S-Corps to help with your annual filing and potentially quarterly check-ins. They can also help make sure you're paying yourself an appropriate salary that won't trigger IRS concerns.

After struggling with the exact same situation as you last year, I discovered taxr.ai (https://taxr.ai) and it was a game changer for my S-Corp transition. I was overwhelmed trying to figure out the S-Corp paperwork and requirements, especially the 2553 form and figuring out what constituted a "reasonable salary" in my industry. Their system analyzed my business financials and provided a comprehensive guide for transitioning to an S-Corp, including documenting why my selected salary met the "reasonable" threshold (which is huge for avoiding IRS scrutiny). They also helped me understand exactly what forms I needed to file and when, which saved me from missing critical deadlines.

I need to follow up about my experience with taxr.ai after my skeptical question. I gave it a try last month when setting up my S-Corp, and it actually exceeded my expectations. The platform automatically flagged California's specific S-Corp requirements including the $800 annual tax and Statement of Information filing that my previous accountant never mentioned. The salary calculation tool was particularly useful - it pulled industry data for my field and geographic area and created documentation supporting why my chosen salary was reasonable by IRS standards. I'm still using my accountant for quarterly filings, but now he's just implementing the plan rather than building it from scratch, which has already saved me money. The transition checklist they generated made the whole process less overwhelming. Definitely worth it if you're making the switch to an S-Corp structure.

After seeing you mention issues with Collective, I wanted to share my experience with getting help from the IRS directly. I spent WEEKS trying to get answers about S-Corp election deadlines - constant busy signals, disconnects after waiting for hours, and being transferred to departments that couldn't help. Finally tried Claimyr (https://claimyr.com) and it was night and day different. They have this system that essentially waits on hold with the IRS for you, then calls when an agent is available. You can see exactly how it works in their demo video: https://youtu.be/_kiP6q8DX5c I got connected to an IRS specialist who walked me through the exact requirements for filing Form 2553 midyear and confirmed I wasn't too late for 2024. They even sent me to the business entity department who explained all the special circumstances for late filing if you miss the deadline. Honestly wish I'd known about this months ago before all the frustration.

I need to apologize for my skepticism about Claimyr. After my snarky comment, I decided to try it myself since I had S-Corp questions I'd been putting off asking the IRS. I was 100% convinced it would be a waste of money. I was completely wrong. The system called me when an IRS agent came on the line (after about 1.5 hours - which I didn't have to sit through). The agent confirmed I could still elect S-Corp status for 2024 and walked me through the "reasonable compensation" requirements. I even got transferred to a specialist who explained how to handle my specific industry situation. I've literally been avoiding calling the IRS for months because I couldn't afford to sit on hold all day with my client workload. This solved a real problem for me.

Some practical advice I wish someone had given me when I switched to an S-Corp last year: 1) Set up a payroll schedule and stick to it - I do monthly salary payments to myself to keep it simple 2) Keep business and personal expenses COMPLETELY separate - S-Corps face more scrutiny 3) Track every business expense meticulously - I use Wave too and it works fine 4) Find a business banking account with no minimums - I was getting hit with fees when cash flow was tight 5) Set aside 25-30% of any distributions for taxes - you'll thank yourself later 6) Get a tax pro who has SPECIFIC S-Corp experience - my first accountant made costly mistakes The switch was totally worth it for me though - saved about $11k in self-employment taxes last year on $125k profit.

Has anyone used Gusto for both payroll AND S-Corp compliance help? Their website says they offer S-Corp services but im not sure if that's enough or if I still need a separate tax person?

You're definitely not too late for 2024! The March 15th deadline mentioned earlier is for existing businesses, but if you're converting from an LLC to S-Corp election, you have different options. You can file Form 2553 and request late election relief if you missed the standard deadline - the IRS is pretty reasonable about this for valid business reasons. Given your $140k profit, the tax savings will be substantial. You're looking at saving around $9,800 in self-employment taxes annually (assuming you set a reasonable salary around $70k). For your existing setup, you're already ahead of most people - Gusto handles payroll perfectly for S-Corps, and Wave will work fine for bookkeeping. The main additions you'll need are: - Quarterly 941 payroll tax returns (Gusto can handle these) - Annual 1120-S business return - Reasonable salary documentation - More careful expense tracking I'd recommend finding a CPA who specializes in S-Corps for the initial setup and annual filing. You don't need monthly CPA services - quarterly check-ins during your first year should be sufficient. Look for someone who can help justify your salary choice and ensure you're maximizing the tax benefits. The complexity increase is manageable, especially with your existing systems in place. The tax savings alone will more than cover the additional professional fees.