Questions about S Corp ownership transfer from family member?

12 Thanks for this info, really helpful. Do I need to worry about anything related to basis in the company? I've heard something about "stock basis" but I'm not sure how that works with taking over an S corp from a family member. Also, since I've already been running things for a few months, am I in trouble for not reporting the change right away?

8 Stock basis is definitely something you'll want to understand. Your initial basis is typically what you paid for the shares. This becomes important when you take distributions or if the company reports losses that flow through to your personal return. If your basis is too low, distributions could become taxable. No, you're not in trouble for not reporting the change immediately. The ownership change will be reported when you file the S corporation's next tax return. However, if you're the new responsible party for tax matters, filing Form 8822-B within 60 days of the change would be recommended. If you've missed that window, I'd just file it as soon as possible.

22 How exactly does this work? Do they connect you with an actual CPA or is it just software that reviews your documents? I'm hesitant to share business financial info with just any online service.

9 Did they help with the actual preparation of your tax documents or just give you feedback on what needed to be fixed? I'm trying to figure out if I need this service AND an accountant or if this could replace the accountant altogether.

15 They use AI to analyze your documents and highlight potential issues, but actual tax professionals review everything. It's not just automated software - there's human expertise backing it up. They have strict privacy protocols too, which was important to me since I was sharing sensitive business information. They don't replace an accountant for filing purposes - they're more like a second opinion or audit prevention tool. I still have my accountant prepare the actual returns, but now I go into those meetings with a clear understanding of what needs to be addressed. In my case, they identified several issues my previous accountant had missed entirely.

17 Wait, how does this actually work? The IRS phone system is notoriously impossible to navigate. Do they just call on your behalf or what?

3 Sorry but this sounds too good to be true. I've tried EVERYTHING to get through to the IRS about my business tax issues. Are you saying this service somehow jumps the queue? I find that hard to believe.

5 They don't call on your behalf - they basically navigate the IRS phone system for you and when they reach an agent, they connect you directly to them. You have the actual conversation yourself. It's like having someone sit on hold for you and navigate all the prompts until they reach a human. The IRS actually has many different departments and phone numbers, and most people don't know which ones to call for specific issues. Claimyr knows exactly which numbers to call and when for different tax matters. And yes, they legitimately get through when most of us can't. I was skeptical too, but I spoke with an actual IRS representative about my S corp questions after months of trying on my own.

1 Thanks for mentioning the state filing requirements. I didn't even think about that! Do you know if I also need to update the company's EIN with the IRS since ownership has changed? Or does the EIN stay the same as long as it's the same corporation?

10 For an S corporation, the EIN typically stays the same when ownership changes as long as the entity itself remains the same legal entity. You're just changing shareholders, not creating a new company. Regarding state requirements, it varies dramatically by state. Some require a simple update form while others may require you to file amendments to your articles of incorporation or organization. Check with your Secretary of State's business division website - most have specific forms for reporting ownership changes.

8 With an S corporation, you only pay Social Security and Medicare taxes (equivalent to self-employment tax) on your W-2 wages/salary, not on the distribution portion. This is actually one of the big advantages of an S corp compared to a sole proprietorship or LLC. So you should be taking a reasonable salary that's subject to employment taxes, but any additional profits you take as distributions aren't subject to those taxes. Be careful though - the "reasonable salary" part is crucial. The IRS looks closely at S corps that try to minimize payroll taxes by taking minimal salary and large distributions.

19 That makes things much clearer, thank you! One more question - when you say "reasonable salary," is there some formula or percentage the IRS expects? Like should my salary be at least 50% of profits or something specific like that?

There's no specific formula, but the IRS looks at what you would pay someone else to do your job. They consider factors like your role, responsibilities, hours worked, industry standards, and geographic location. A good rule of thumb is to research what similar positions pay in your area and use that as a baseline. Some tax professionals suggest keeping salary at least 40-60% of net business income, but that's just a guideline. The key is being able to justify your salary amount if questioned. Document your research on comparable salaries and keep records of your duties and time commitment to the business. Since you're coming from being an employee in the same business, you probably have a good sense of what the role is worth. Just make sure you're not dramatically underpaying yourself compared to what you were earning before, especially if your responsibilities have increased as the owner.

Great advice from Leeann! I'd also suggest documenting your decision-making process for the salary amount in case the IRS ever questions it. Keep records of salary surveys you looked at, job postings for similar roles, and maybe even get quotes from recruiters about what they'd expect to pay for your position. One thing that helped me was actually looking at what other S corp owners in similar businesses were paying themselves (you can sometimes find this info in industry reports or through business associations). Since you took over from family, you want to be extra careful that the salary looks legitimate and market-based rather than just continuing whatever arbitrary amount was set before. The 40-60% guideline mentioned above is helpful, but remember it can vary a lot by industry. In some businesses, owner-operators might justifiably take 70-80% as salary if they're doing most of the work, while in others with high profit margins, a smaller percentage might be reasonable.