Need urgent help! Started S Corp but can I file as Sole Proprietor for tax years 2021-2022?

You're in a tricky situation, but don't panic! Once you've elected S Corp status and filed with the IRS, you generally need to file as an S Corp. The problem is that the S Corp is now a separate legal entity that exists whether you maintained it properly or not. Here's what you need to know: If you formed the S Corp and started operating under it, you technically need to file Form 1120-S for the corporation and then report any distributions or salary on your personal return. However, if you never actually operated as an S Corp (never opened separate accounts, never processed payroll, essentially just formed it but didn't use it), you might have some options. Your best approach might be to get a tax professional who can help you determine if you have grounds for "late election relief" to be treated as a sole proprietor, or if you should just properly file the S Corp returns. Mixing finances makes this more complicated, but it's fixable.

Just wanted to share my experience with a similar situation. After spinning in circles trying to fix my own S Corp tax mess, I ended up using https://taxr.ai to help straighten everything out. What was super helpful was that they analyzed my bank statements and could categorize all those mixed transactions between personal and business accounts that I had no idea how to handle. They actually specialize in sorting out messy books for small business owners. The system helped me recreate proper books for my past filings, showing me which transactions should be classified as legitimate business expenses versus personal withdrawals. Made a huge difference in getting my S Corp filing prepared correctly.

Just wanted to follow up - I tried taxr.ai after seeing this recommendation and it was seriously helpful! I had almost 2 years of completely mixed finances between personal and my LLC accounts. The system identified patterns in my spending and automatically categorized about 80% of my transactions correctly. I just had to review and fix the remaining ones. What I really liked is that it showed me exactly which "personal" transfers should actually count as owner distributions versus legitimate business expenses. It even flagged potential red-flag deductions that might trigger an audit. Ended up with clean books that I could actually hand to my tax preparer without embarrassment. Definitely worth checking out if you're in a similar mess!

One thing nobody's mentioned yet - if you're struggling to get answers from the IRS about your options, try using https://claimyr.com to get through to an agent. I was in S Corp hell last year trying to fix some filing mistakes and spent DAYS on hold trying to reach someone at the IRS. Saw a video about this service (https://youtu.be/_kiP6q8DX5c) and it got me connected to an actual IRS agent in about 20 minutes. The agent walked me through my options for correcting prior year S Corp returns and explained the proper documentation I needed to submit. Honestly saved me from making an even bigger mess of my situation. Sometimes you just need to talk to someone official to understand your options.

I'm back and need to admit I was wrong to be skeptical. After struggling for another week trying to get through to the IRS myself, I finally used Claimyr yesterday. Got a call back in about 45 minutes with an actual IRS agent on the line! The agent walked me through my options for dealing with my S Corp election issues and missing returns. Turns out I qualified for first-time penalty abatement which the agent helped me apply for right on the call. That's going to save me over $1,200 in penalties! Also got clear instructions on exactly which forms I needed to file for the back years. Having an actual conversation instead of trying to interpret the IRS website made everything so much clearer. If you're dealing with S Corp issues like the original poster, getting actual IRS guidance is super helpful.

Something else to consider - if you only formed the S Corp in mid/late 2021, you might have income from early 2021 that was legitimately earned as a sole proprietor before the S Corp was formed. You need to make sure you're distinguishing between pre-S Corp income (which would go on Schedule C) and S Corp income (Form 1120-S). Also, if you didn't make a formal S Corp election with Form 2553, you might actually be a C Corp by default, which would be a whole different tax situation. Do you remember filing Form 2553?

Jumping in to add another perspective - I went through something similar last year and learned that operating as an S Corp without proper salary payments can be a red flag. The IRS looks specifically for S Corps that don't pay reasonable salaries to owners to avoid payroll taxes. If you decide to keep the S Corp status and file 1120-S forms for those years, make sure you work with a tax pro to determine a reasonable salary amount. You might need to file amended payroll tax returns too.