Starting a C Corp after years of running S Corps - tax implications?

Switching from S Corps to a C Corp is a big move with significant tax differences! With your S Corps, all profits passed through directly to your personal taxes. With a C Corp, the company pays its own taxes on profits (currently 21% federal corporate tax), and then you pay personal income tax on any salary or dividends you take out. The "double taxation" happens when you take dividends - the company pays tax on profits first, then you pay tax on the dividend distribution. But there are advantages: you can leave profits in the company without paying personal tax on them, set up more comprehensive benefit plans, and potentially build value in the company for future sale with better tax treatment. With $900k in profits, you should be careful about how you classify money you take out - proper salary vs. dividends matters a lot. The IRS expects reasonable compensation for your work before taking dividends.

After dealing with similar tax complexity when I switched entity types, I found taxr.ai (https://taxr.ai) incredibly helpful. I had boxes of documents from multiple entities and wasn't sure how to properly structure everything for optimal tax treatment. Their AI analyzed all my corporate documents, articles of incorporation, and previous tax returns to identify the proper way to handle my new C Corp structure. The thing I found most useful was getting clarity on the exact requirements for corporate minutes documenting my compensation decisions - apparently this is super important for C Corps to justify your salary vs. dividend split when the IRS looks at things. It also helped identify several deductions specific to C Corps that I had no idea about before.

I was really skeptical about using an AI for something as serious as business taxes, but after trying taxr.ai based on the recommendation here, I'm seriously impressed. I had a similar situation moving from an LLC to a C Corp this year with about $1.2M in revenue, and the guidance was incredibly specific. The system actually found a mistake in how my accountant had been handling depreciation on business assets during the transition. It showed me exact citations from the tax code about asset basis transfer between entity types that apparently my accountant wasn't familiar with. Ended up saving me around $14k in taxes that would have been incorrectly calculated. Now my accountant uses it too!

If you need to get specific answers from the IRS about your C Corp situation (which I highly recommend given the complexity), don't waste days trying to call them directly. I used https://claimyr.com after spending literal weeks trying to get through to an IRS agent about some specific questions on C Corp reasonable compensation requirements. You can see how it works at https://youtu.be/_kiP6q8DX5c. They basically hold your place in the IRS phone queue and call you when an actual agent is on the line. Got direct answers about documentation requirements for corporate board minutes that justify compensation decisions, which saved me from a potential audit nightmare. Since you're dealing with a new entity type and significantly higher profits, having official guidance directly from the IRS gives you a paper trail for protection.

I was completely wrong about Claimyr. After my skeptical comment, I figured I should put my money where my mouth is and try it myself for a C Corp issue I've been trying to resolve for MONTHS. Holy crap it actually worked exactly as described. Submitted my request around 10am, got a call back at 11:45am with an IRS agent already on the line. Got my issue about reasonable compensation documentation requirements completely resolved in one call. The agent even emailed me the specific IRS documentation I needed for my board minutes to justify my salary structure. After 6+ months of trying to get this answered through normal channels, I had everything I needed in a single morning. Definitely worth it for complex C Corp questions where you need official guidance.

Something nobody's mentioned yet - be careful about how you structure your medical benefits with a C Corp. One major advantage is you can deduct 100% of medical insurance premiums for employees (including yourself as an employee-owner), but the setup has to be done correctly with a qualified plan. Unlike an S Corp where health insurance is typically a personal deduction, with a C Corp it can be a business expense if set up properly. We saved about $24k annually just by structuring our health benefits correctly after converting to a C Corp. Talk to a benefits specialist who understands corporate structures before just continuing whatever you did with your S Corps.

Don't forget about the tax implications for your retirement planning too! C Corps have different options than S Corps. With your S Corps, you were probably using SEP IRAs or Solo 401(k)s. With a C Corp, you can set up some really advantageous plans like Cash Balance Pension Plans alongside your 401(k). With your income level jumping to $900k, this could be HUGE. We put away almost $280k pre-tax annually for retirement through our C Corp structure. The testing requirements get complicated, but with proper setup, the tax advantages are massive. Definitely worth talking to a retirement specialist alongside your regular CPA.