Book the S corp election review | Steven Palmieri

Question 1

Will an S corp election lower what I pay?

Accepted Answer

It might, and for plenty of owners it does not move enough to justify the machinery it drags in. The election changes how you take money out of your own business, a salary the IRS would consider reasonable plus distributions, and that changes how self employment style tax lands on you. Whether it comes out ahead depends on your profit, how you pay yourself today, your state, and what else sits on your return. Anyone quoting you a figure before reading that return is guessing.

Question 2

What does converting from an LLC to an S corp actually involve?

Accepted Answer

An election, and then a different way of running the business. You go on payroll at a salary that has to hold up if anyone asks, the rest comes out as distributions, and the business files its own return every year. Bookkeeping stops being optional, because the numbers behind that salary are the whole defense. None of it is exotic. It is work, and somebody has to own it.

Question 3

My tax person never brought this up. Should I be worried?

Accepted Answer

Ask them why, and listen closely to the answer. There are real situations where the election would cost you more than it saves, and an advisor worth the fee tells you so before you ask. There are also filers who never look up from the forms long enough to raise it. Twenty minutes on last year's return tells you which one you have been paying.

Question 4

Is it too late to do anything about this year?

Accepted Answer

Some of it is still open and some of it can only be set up for next year, and which is which depends on where you are and what you have already done. The election itself has a filing window early in the year, which is one more reason this gets decided in the fall instead of discovered in the spring. Bring the return and you leave the call with the list.

Question 5

Does an LLC or an S corp get a 1099?

Accepted Answer

That depends on how the business is taxed, which is the part most owners are never told. Customers generally do not have to issue a 1099-NEC to a corporation, and an S corporation counts as one, with limited exceptions such as payments to attorneys. An LLC follows its tax classification instead: taxed as a sole proprietorship or a partnership it generally gets the 1099, and after an S corp election it generally does not. Your customers go by the W-9 you handed them, so an election nobody passed along turns into mismatched forms later. The exceptions are listed on irs.gov in the instructions for Form 1099-NEC. It is one of the things we check when we read last year's return.

Question 6

Who does the work if we go ahead?

Accepted Answer

Steven Palmieri and his team. The same people keep the monthly books, run the payroll, do the planning, and prepare and file the returns, so nothing gets handed to a stranger at the deadline. We do not perform audits, reviews, or compilations. If a lender needs audited statements, a licensed audit firm does that piece and we hand them clean books to work from.

Bring last year's return. Leave knowing whether the S corp fits.

Pick your twenty minutes