Late S Corp Election

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Updated Friday, October 18, 2024

Table Of Contents

Late S CORP electionS Corp status back to January 2023? No problem! The late S corp election can easily be done well into 2024 for 2023 as well (but there are things to work through)! How does this fit into S Corp vs LLC discussion? The S Corp election takes your LLC (or PLLC or C Corp or PC) and changes the way it is taxed to reduce self-employment taxes. The underlying entity remains intact. Only the way it is taxed changes.

Every year for nearly two decades, WCG CPAs & Advisors has successfully prepared and filed around 150 Form 2553 S Corp elections with a 100% success rate. Zero calories. No trans fats. Sprinkle in some tax savings, and it’s pure deliciousness! Okay, maybe we got carried away, but you get the idea.

Do you remember the old Van Halen song, Hot for Teacher? “I don’t feel tardy.” We don’t want you to feel tardy about your election to be taxed as an S corporation.

So if you are past the 75 days from January 1 or business inception, no worries—in true IRS fashion there is one rule (don’t be tardy), and fifty exceptions (my dog ate it). Form 2553 is no different, but filing it late has to be done correctly, and we can help!

S Corp Benefits Summarized

Here are the quick benefits of an S Corp election:

  • Primary benefit is the reduction of Social Security and Medicare taxes (self-employment taxes).
  • You might need to process payroll (pay wages) to not be wage-limited on your Section 199A qualified business income (QBI) deduction. An LLC or a partnership cannot pay wages to its owner(s).
  • The state and local tax (SALT) workaround only works with pass-through entities (PTEs). Your LLC cannot take advantage of the SALT work-around / PTET deduction without an S Corp election.
  • Lower audit risk: Business activities reported on a Schedule C of your Form 1040 tax return tend to attract audits or IRS challenges for auto expense, meals, and travel. Your audit rate risk with an S corporation tax return is 0.4%.
  • Certain taxing jurisdictions, such as California, have an egregious tax system that penalizes LLCs with additional taxes. An S Corp election might avoid this or significantly reduce this (in California, a garden-variety LLC is a dirty word).

Do you want a more obscure S Corp benefit? Of course you do!

A Qualified Subchapter S Subsidiary, also known as a QSub or QSSS, is simply an S corporation that’s owned by another S corporation. A QSub is treated as a subsidiary of the parent S corporation. Why do you care? At times, you want to merge two businesses, but the assets are immovable (think of a Medicare certification or a specialized defense contract). You might need to S elect one before the combination because of certain rules with the merger.

You might also want to combine gross receipts for the passive investment income test, or combine basis between stock and loan basis, or combine to release accumulated earnings and profit (AE&P).

Are you regretting asking? It’s OK, we’ll move along.

S Corp Election Checklist

So we showed you all the benefits, fees and such… but we need to put the horse back in front of the carriage. Let’s go through a quick checklist to ensure we aren’t going down the wrong road. As Doc Brown in Back to the Future says, “Roads? Where we’re going, we don’t need roads.” Well, in S Corp land, we do:

  1. Does your business earn over $48,000 net income (profit) after expenses? Say yes.
  2. Are you located in New York City or Tennessee, where S corporation tax rates are egregious and suck up all the federal tax savings? New Hampshire? Portland, Oregon? Say no. Although there might be exceptions where an S Corp makes sense, NYC, TN, and NH in order to maximize Section 199A deduction benefits.
  3. Do you have other W-2 income that exceeds or comes close to exceeding the Social Security limits of $168,600 (2024)? Say No. If you say yes, we need net business income to exceed $200,000 in #1 above so that the Medicare savings exceeds the “lost” Social Security tax paid by the S Corp (huh? We can explain).
  4. Is this a going concern? In other words, is the business going to continue to earn the same income or more each year? Say Yes.
  5. Do you have an LLC or some other entity in place that can be elected to be taxed as an S Corp? Say Yes. If you say No, we have options, just not elegant ones such as Shelf Corporations.
  6. Do you have other partners besides a spouse… business partners, that is? Say No. If you say yes, are you currently splitting income based on ownership percentages or some formula? If you say Formula, then we’ll need to explore a multi-entity arrangement.
  7. Does your entity own any appreciating assets, such as real estate? Say No. We don’t put appreciating assets into an S corporation. Holding companies own real estate and operating companies elect S Corp status. Chinese Wall.

Are you still here? Excellent news… read on! You can also complete a PDF version of the above questions, and send them to us for review.

S Corp Questionnaire

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Multi-Entity Structures

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Multi-Entity Structures

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Common S Corp candidates and current clients for WCG are consultants, engineers, financial advisors, physicians, chiropractors, doctors, surgeons, anesthesiologists, nurse anesthetists (CRNA), insurance agents, attorneys, photographers (the profitable ones), online retailers, FBA retailers, real estate agents, good, old-fashioned widget makers, among several others. We also have many medical groups and financial advisor teams. Yes, even those deemed to be specified service trades or businesses still benefit with Section 199A coupled with an S Corp election! Double your pleasure.

Does an S Corp Make Sense?

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Late S Corp Election Advantages

As you know, being taxed as an S Corp has huge tax savings because you avoid self-employment taxes. Through an S Corp election you are limiting the amount of income subject to Social Security and Medicare taxes which are bundled to be called self-employment taxes. The savings are easily 8-10% of your net business income after expenses (based on $100,000 net biz income). In other words, if you earn $100,000 in net business income after expenses, your tax savings with an S Corp election could be $8,000 to $10,000. This is the big difference when considering the S Corp vs. LLC discussion.

This article is about late S corporation elections and not a drill-down of the nuts and bolts tax savings. If you need more information on how this works and other S corporation advantages, click on the button below:

Avoid Self-Employment Taxes

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Still not sure or not convinced? No problem! Please check out Line 4 on Schedule 2 of your Form 1040 tax return. This number reflects the self-employment taxes paid on your business income. We want to reduce this by 60 to 65%. So, if this number is $15,000 then we probably get this down to about $7,000 or so which suggests an $8,000 tax savings.

Form 2553 (the S Corp election form) must be filed with the IRS which tells the IRS that your entity (LLC, partnership or C corporation, and the professional variants) wants to be taxed as an S corporation. It is typically due within 75 days of forming your business entity or the start of your fiscal year, however, there is relief for the late filing of Form 2553 and WCG can guide you through that. IRS Revenue Procedures 2003-43 and 2004-48 used to be the governing rules, but the IRS has simplified the procedure (imagine that!).

S Corp ElectionIRS Revenue Procedure 2013-30, effective September 3, 2013, allows an entity to get relief and file a late S Corp election within 3 years and 75 days from the date the election was originally intended to be effective. Holy cow. Three years! The IRS is basically saying that if you walk, talk and smell like an S Corp, then you are an S corporation.

So, if it is November 2023, and you want to go back to January 1, 2023 for setting up S corp status, no problem. We prepare and file Form 2553 under IRS RevProc 2013-30, open payroll accounts in your home state (yup, payroll!), process a payroll event that encompasses the entire year and you get a nice W-2. Done! All that is left is preparing your S corporation tax return on Form 1120S and your individual tax return.

What happens if it is too late to open payroll accounts and process a 2023 payroll? Typically, we issue a 1099-NEC from the S Corp to you, the human, to simulate shareholder payroll. This is first-year mulligan stuff, and the following year and beyond, proper payroll must be processed. Yes, complete with pay stubs and a W-2. At times, we manually process a late payroll event, but that is usually because of Section 199A Qualified Business Income Deduction benefits. More on this in a bit.

Let’s talk about the fees. here is a snapshot of our fees to do all this for you:

  • Late S Corp Election, $600 ($450 for timely elections), $1,200 if after March 1, 2024 (we can explain why)
  • Payroll Setup, $550 (CA, CO, TX easier… NY and PA, rough, like a stucco bathtub)
  • Q4 Payroll Event and Tax Planning, $850 (or $450 if we skip tax planning)

Five states require a separate S corporation election form to be filed: Arkansas (really?!), New York, New Jersey, Ohio and sometimes Wisconsin.

If you live in a community property state such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin your spouse might need to sign the Form 2553 even if he or she is not a shareholder. As a side bar, community property laws originate from Spanish property laws which is why most of our bordering states are community property states (red does not mean Republican). Wisconsin has no excuse, and Idaho was just caught in some peer pressure from Washington and Nevada.

2023 Late S Corp Election in 2024

Another scenario! Let’s say it is March 2024 (tax season) and you’re freaking out because you forgot to make the S Corp election earlier. You can still file a late S Corp election Form 2553 back to January 1, 2023 but there are hiccups. Isn’t hiccups such a friendly word? Sort of like bumps in the road. No one says pitfalls or disasters anymore, just hiccups.

Bottom line is, we can engage in some revisionist history on March 1, 2024 and simulate Shareholder Wages / Officer Compensation for December 31, 2023 via a 1099-NEC issued from your S Corp to you individually. No worries, this is a one-time mulligan. We have been successfully, legally and ethically doing this since 2007 under IRS guidance. You’ll need real payroll and a real W-2 in 2023 so brace for that required impact. Here are our transparent fees:

  • Prior Year Late S Corp Election, $600 if can file by March 15, otherwise $1,200 (we can explain why)
  • Officer Compensation via 1099, Tax Planning, End of Year Tax Moves, $850
  • 2023 Corporate and Personal tax returns, typically about $2,300 for both

Total out the door for 2023 is $3,750. So, if you have $100,000 in net business income after expenses, you’ll still pocket about $5,000 after our fee and your S corporation will be set up and ready to go for 2023 and 2024 (you still need payroll setup). Boom! Economists love cost-benefit stuff. Other humans just like money.

If your current CPA or tax professional says No, we suggest you find a new accountant (or at least educate him or her). WCG and other reputable CPA firms have been doing this for nearly two decades (there was relief provisions prior to the 2013 issuance of IRS Rev Proc 2013-30) without major problems.

Three things happen simultaneously with a prior year late S Corp election:

  • Completing Form 2553 including the reasonable cause letter,
  • Determining reasonable Shareholder Wage / Officer Compensation, and
  • Preparing the S corporation’s tax returns (Form 1120S)

Since the IRS is a huge organization, the right hand doesn’t always talk to the left hand. Shocking, we know. Additionally, the IRS is bound by regulation to process Form 2553s within 60 days. However, they don’t, and they are taking about 4–6 months as of this writing. Therefore, after Thanksgiving, we electronically attach the late S Corp election to the tax returns, and file them together. Before that, we can fax Form 2553 with good success.

Why do you care? We cannot attach the late S corporation election form to an extension. There are three scenarios with varying elegance:

  1. File Form 2553 before Thanksgiving. You can likely extend your S Corp tax returns (if you need to). Elegant.
  2. After Thanksgiving, prepare both the tax return and election paperwork for the S Corp. File together by March 15. Also, elegant.
  3. After Thanksgiving, and you need to extend for whatever reason. This gets messy. We will attempt to extend the tax return, but it will be rejected because of an entity mismatch in the IRS database (however, we have a time and date stamp akin to the lite version of a get out of jail free card). We file in the summer, and that kicks off a nastygram about late filing penalties, etc. Next, we use our time and date stamp as proof of our attempt to file a timely extension. All this works, but it does take extra brain cells (40-50 new S Corps find themselves in this bucket each year at WCG CPAs & Advisors, so you won’t be alone).

Section 199A Deduction

Section 199A deduction also known as the Qualified Business Income deduction (QBID) arises from the Tax Cuts & Jobs Act of 2017. This is a significant tax break for small business owners, but there are rules and limits of course. We have written a short article which outlines what is considered a qualified business for the qualified business income deduction including the dreaded specified service trade definitions (which is easily summed up as “any trade or business where the principal asset is the reputation or skill” of the owner). All this stuff is in our book as well!

Click on the button below for our articles:

Section 199A Deduction General

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Section 199A and S Corps

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Section 199A and Rentals

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Even with Section 199A, S corporations remain a critical tax saving tool for two reasons. First, the usual self-employment tax savings remains intact for all business owners including specified service trades or businesses. Second, a business owner might need to pay W-2 wages to himself or herself to not be limited by income, and only corporations can pay W-2 wages to owners (in other words, an LLC cannot without an S Corp election). Read the article above for riveting information!

This information is also incorporated into our book including examples and calculations. Happy Happy Joy Joy!

LLC and S Corp Book

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Business Advisory Services

Beyond Sole ProprietorshipWCG CPAs & Advisors specializes in small businesses who generally have fewer than 25 employees. Why? We want to help people, and more importantly we want to help the business owner directly. Frankly speaking, once a business gets to a certain size management layers get in the way of owner access. Access allows us to ensure the owner(s) are leveraging the most out of their business for themselves and their families.

Because small business is a core competency for us, we have created business advisory service plans which include these really cool things-

A la Carte* Vail Telluride Aspen
2024 Tax Planning and Preparation
Pro-Active Household Tax Planning, Tax Projection Worksheets $350 to $500 Advanced
Pro-Active Business Entity Tax Planning, PTET Calcs, SALT Workaround $500 to $750 Add-On*
Annual Tax Reduction, Shifting, Deferral Analysis $350 to $500
Small Business Tax Deductions, Optimization Included
Section 199A QBI Deduction, Tax and Salary Optimization $300
Estimated Income Taxes (via increased payroll withholdings) Included
Business Entity Tax Return (Form 1065, 1120, 1120S) $1,500 starting
Individual Tax Return (Form 1040, joint filing), One Owner $800 starting
Expat, Foreign Income Calcs (Form 2555, FBAR, Form 8938) $300 to $500 Add-On Add-On Add-On
Tax Resolution, Audit Defense Varies As Req'd As Req'd As Req'd
Financial Planning, Calculations, Discussions $900 to $2,500 Add-On Add-On
Situational Tax Law Research (up to 3 hours annually) $750 to $1,000
Payroll and Accounting Services
Reasonable Shareholder Salary Calculation (RCReports) $500
Monthly Shareholder Payroll Processing (includes spouse, kids extra) $1,200
Employee Payroll Processing (bi-weekly, direct deposit) Varies Add-On Add-On Add-On
Annual Payroll Processing (W-2s, other filings, up to ten 1099s) Included
Accounting Services (bookkeeping + analysis, see below) Varies Add-On Add-On Add-On
Quarterly QuickBooks Consulting (QuickStart Launch) $250, $750 Add-On Add-On
Business Advisory Services
Consultation
Business Consultation, Periodic Business Reviews $250 to $1,000 Annually Routine Routine
Complimentary Quick Chats (CQC) $250 to $500 Routine Routine Routine
CPA Concierge Services Varies Add-On Add-On
Interfacing with Lenders, Attorneys, Financial Planners $750 Routine Routine
Financial Analysis
Fractional Controller (monitoring 3rd party bookkeeping) Varies Add-On Add-On Routine
Quarterly Financial Statements Analysis, Comparisons $1,200 Add-On* Add-On*
Annual Cash Flow Management, Analysis $1,500 to $2,500
Annual Budgeting, Forecasting, Goal Setting $750 to $1,000
Annual First Research Reports, Industry-Focused Consulting $350 to $600
Annual National and Metro Economic Reports $150
KPI Analysis, Benchmarking, Hot Sheets, Trend Analysis $500 to $1,500
Strategy and Maintenance
C-Level Financial Advice, Strategic Planning (Fractional CFO) Varies
Succession Planning, Ownership Changes Consultation $750 to $1,000 Routine
Annual Business Valuation $2,500 to $3,000
Annual Corporate Governance, Resolutions, Meetings $150 + filing fee Add-On Add-On
Annual Fee* $4,500 $4,980 Custom
Paid Monthly $375 $415 Custom

(prorated based on onboarding date)

Custom! Unlike the modern day new car packages where you have to spend $8,000 for the moonroof, our Business Advisory Service plans can be customized specifically for you. The array above is simply a starting point. If you need more or less from us, let’s chat about it!

Fees Updated! Our Business Advisory and Tax Patrol Service fees were updated August 2024, and we usually hold fees for at least two years (or through December 31, 2026) unless inflation skyrockets back to 9%.

Sample Advisory Proposal

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Master Service Agreement

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Tax Planning Services

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Tax Patrol Services

Beyond Sole ProprietorshipWe also have Tax Patrol! This is a wonderful tax service for those who don’t need all the business advisory bells and whistles above, but from time to time want some love from an experienced tax consultant and business advisor. Have a quick tax question? Need to know the depreciation rules as you buy that new car? Wondering what your April tax bill is going to be in August? Tax Patrol is like ski patrol… you might not use it, but you sleep better knowing you have it.

A la Carte* Keystone Copper Breck
Individual Tax Return Prep (Form 1040, joint filing) $800 starting
Business Entity Tax Return Prep (Form 1065, 1120, 1120S) $1,500 starting
Tax Planning, Tax Projection Worksheets $350 to $500 Streamlined Pro-Active* Pro-Active*
Estimated Tax Payments Calcs Included
Tax Resolution, Audit Defense NA Add-On Add-On Add-On
Complimentary Quick Chats (CQC) $250 to $500 Routine Routine Routine
Annual Fee* $1,500 $2,400 $3,360
Paid Monthly $125 $200 $280

(prorated based on onboarding date)

Real Estate Investors! We also have Investor Patrol Services for our real-estate minded clients who are building an empire and need tax return preparation, tax planning and comprehensive rental property related tax assistance.

Investor Patrol Services

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Rental Tax Deductions

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Short-Term Rental Loophole

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*The Asterisk

Yeah, we all dislike the little asterisk. The gotcha! The fine print! Well, here is one of those situations. Pro-active and Pro-active Biz Tax Planning are different. Pro-active tax planning is limited (for individuals and households) and does not include business-entity tax planning and payments (California’s Franchise Tax, New Jersey’s BAIT, Portland’s overall madness, NYC, etc.), pass-through entity tax (PTET) calculations and payments, among other things. Not every business entity needs separate tax planning! Texas, No. California, Yes. Please see our Tax Planning Services page and Master Service Agreement for more information.

Our Telluride Business Advisory plan includes the pro-active business tax planning plus interfacing with lenders, attorneys and financial planners.

Afraid of bait and switch? Yeah, we think that stinks too. Our annual fee for Vail, as an example, is $4,500. What can make this fee go up? The most prominent reason is additional state tax returns (taxing jurisdictions). However, we will detail that in your proposal. Please see our individual and business entity tax return preparation pages for more information.

Quarterly financial statements analysis is an add-on service, however it is included automatically if you use our accounting services.

Tax Planning Services

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Tax Reduction Strategies

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Pass Thru Entity Tax Deduction

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Our Way of Business

Here are some quickie FAQs to learn more about WCG CPAs & Advisors, and how we do business-

Do you extend a lot of tax returns?

Nope. We have a t-shirt that reads, “Hate extensions. Love our summers.” We file 70% of our tax returns by April 15, and only extend per the client’s request or if there is missing data such as a rogue K-1. We’ll go as quickly as you let us! Also, we don’t have A listers… we prepare tax returns in first-in first-out sequence. Sure, we leave room for emergencies or other issues that allow for jumping the line.

How is Business Advisory different than Tax Patrol or Investor Patrol?

Good question! Our Business Advisory Service plans (Vail, Telluride and Aspen) are more advisory forward like a robust old-fashioned with lots of planning, tax strategies and business consultation to help you make decisions. Our Tax Patrol Services (Keystone, Copper and Breck) are more tax return preparation forward like a refreshing vodka-lemonade with less tax planning, or at least less-intensive planning and consultation.

Investor Patrol Services for our rental property owners and investors is somewhere in-between since real estate is a business like any other requiring more planning, strategy and consultation but falls short of needing shareholder payroll planning and processing.

Beyond Sole ProprietorshipHow often do we schedule meetings?

Up to you! In the past, we would pro-actively schedule quarterly meetings with all Business Advisory and Tax Patrol clients, but it was cumbersome for everyone. Today, we generally connect at least 3 times a year in a meaningful way. Once for tax return preparation, once for tax planning and then another for a myriad of reasons (“hey, I am buying a car” or “hey, we sold a rental”). This is all back-filled with emailed correspondence and touch-ups throughout the year. Having said that, with routine consultation offered above, your goal is to extract everything you need from us.

We prefer scheduled meetings over Teams. Check out our CPA Concierge Service as well. Priority boarding. HOV lane. Early check-in.

What is your communication style?

We rely heavily on emails and text message alerts. However, we do not have an allergy to the telephone. During friendly hours (let’s say 8AM to 7PM including weekends) we will usually call first if we have a question or need clarification. We are committed to responding to your email within 3 business days.

To get work chores done, the tax team responds to emails on Mondays and Thursdays only (what we call our “comms” days). Other teams such as payroll and accounting have similar email cadences.

Have an emergency or need an answer sooner? Call us! So much can be done in short order with a phone call (please keep in mind that scheduled meetings is still ideal to ensure availability and readiness).

Who will I be working with?

For tax, we have two-person teams so there is always a backup. Teams are assigned based on who first spoke with you, bandwidth and subject matter expertise. We also have accounting, payroll and business formation / governance. As such, you might have 4 people you work with. Yay! The two tax peeps, and if applicable, a payroll peep and an accounting peep (if you are using our Accounting Services team for bookkeeping + analysis). We also have dedicated Client Support and Tax Support teams to… well… support you and the other teams.

Additional Business Services

The following are additional business services to get your venture launched and on the way. Some of these are teased out separately as one and done fees like formation and onboarding stuff.

Accounting, Payroll
Monthly Accounting (bookkeeping + analysis) starting at $500 per month
Bi-Monthly Accounting (bookkeeping + analysis every 2 months) starting at $250 per month
Quad-Monthly Accounting (bookkeeping + analysis every 4 months) starting at $175 per month
Annual Compliance Bookkeeping typically $1,200 annually
Annual Accounting starting at $1,800 annually
Rental Property Bookkeeping starting at $1,200 annually
Sales Tax, Personal Property Tax typically $75 per month
typically $150 per quarter
Employee Payroll (direct deposit, bi-weekly) 1 employee, $100 per month
2-5 employees, $175 per month
6-10 employees, $250 per month

Fine Print: Starting accounting service fees are based on 2 bank accounts (one checking account and one credit card is 2 accounts) with less than 250 monthly transactions. Our fee does not include the QBO subscription fee from Intuit. Custom quote is available if you have a lot going on such as third-party integrations (POS, time billing system), accrual accounting method, extensive benefits packages and / or industry specific issues (e.g, job costing in construction). The first step for Accounting Services is to do an accounting assessment with one of our experts to determine scope, service level and ultimate fee (see button below).

Even Finer Print: Employee payroll can be added only if already using our Business Advisory Service plans above (e.g, Vail). Custom quote for more than 15 employees and a referral to therapy or a script for Excedrin.

Business Formation
Articles of Organization or Incorporation, or Dissolution $625 + state filing fee
Initial Report (if required) $125 + state filing fee
Annual Report $350 + state filing fee
Employer Identification Number (EIN) Included
Single Member Operating Agreement (SMLLC) Included
MS Word Templated Bylaws Agreement (Corporations) Included
S Corp Election, Timely Election (made with formation) Included
Accountable Plan Included
Onboarding Fees (one and done)
Payroll Accounts Setup, Transfer, Closing $550 to $650 depending on state
Employee Data Transfer $25 per EE, >5
Accounting Setup or Transfer (Fractional Controller) Varies
QuickStart, QuickBooks Setup and Support (90 days) $750
S Corp Election, Timely Election (within 75 days) $450
Late S Corp Election Back to January 2023 $600, $1,200 after Jan 1 2024*
Examine Prior Tax Return Included

For late S Corp elections back to January, we have a split fee of $600 or $1,200… and it depends on if we can file your S Corp by March 15. Ideally, we attach the late S Corp election to the tax return and file both electronically. Yay! Conversely, if we cannot file on March 15, we also cannot electronically extend the tax return. As such, when we file in June or July, it is now considered late. We can usually have the penalties abated, but it takes effort hence the additional $600 fee (the $600 v. $1,200). Be a hero, and get us your stuff right away to save a few bucks and trim down the anxiety.

Business Maintenance
Entity Relocation Package (payroll closure and opening, entity move) $800 (some are $1,050) + state filing fees
Address Changes w/o Payroll (IRS, State Dept of Revenue, Secretary of State) $250 + state filing fees
Address Changes with Payroll (above + state and local payroll agencies) $350 to $450 + state filing fees

Our entity relocation package includes closing your current payroll accounts, opening shiny new ones, moving your entity with the Secretary of State (if applicable) and updating addresses as necessary.

Speaking of address changes… these are tough. Basic address changes require IRS, State Department of Revenue and Secretary of State notifications. Address changes that include payroll add another level of complexity since departments of revenue are not the same as departments of labor, and there might be local or municipal agencies as well.

Accounting Services

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Accounting Assessment

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Reasonable Shareholder Salary

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Business Formation

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Address Changes Are Messy

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Late S Corp Election

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Advisory Services Fine Print

A la Carte

A la Carte fee ranges are approximates. 80% of our clients fit into our published fees, but there are outliers. We have a handful of clients with over 30 rentals; their individual tax return is north of $4,000. We also are assuming one state; if your business spans the galaxy then additional fees will be discussed with you prior to payroll setup or tax return preparation. Typically, each state or tax jurisdiction is around $250 to $350 for tax preparation since it affects both your business and individual tax returns (frankly, state apportionment is a pain in the butt, but it is our pain… and states, especially California and New York, are crazy about it).

Prorated Fees

Some more things to consider- when a partial year remains, our usual annual fee is decremented to not charge you for services you didn’t use such as payroll processing. However, a large chunk of our annual fee is tax return preparation which is typically a built-in fixed amount of $2,300 (both business entity and individual tax returns) plus annual tax planning. Whether we onboard you in January, July or December, we have to prepare a full year tax return. This increases the monthly fee for the remaining months of 2024 but the monthly fee will later decrease in January of 2025 to reflect the amounts above. Yeah, we make it sound like 2025 is just around the corner.

Payroll Processing

We make very little profits on payroll processing… we offer it as a convenience to our clients. One throat to choke with a single call can be reassuring but if you want to run your payroll, go for it! Everyone thinks payroll is a piece of cake; write a check and done. Nope… we see a lot of mistakes being made by small business owners especially the handling of self-employed health insurance and HSA contributions since there are special rules for greater than 2% S Corp shareholders. Then again, we don’t mind fixing what was broken.

Tax Returns

You can prepare your own individual tax return as well… but the benefit WCG preparing both individual and business tax returns is that can we slide things around depending on income limitations, phaseouts, alternative minimum tax (AMT), Section 199A deduction optimization, pass-through entity tax deductions (PTET), etc. Having our arms around both worlds can yield some good tax savings!

Note: An individual tax return is what the IRS calls Form 1040 and refers to the entity filing the tax return (you, the individual, are the entity). However, a married couple are deemed to be one entity for the sake of an individual tax return. So, when we say we will prepare your individual tax return, it is meant to include your spouse in a jointly filed happy happy joy joy tax return.

Break-Even Analysis (does an S Corp make sense?)

Break-even analysis is based on our annual fee of $4,500 for our Vail package. If an S corporation saves you 8% to 10% (on average) in taxes over the garden-variety LLC, then $4,500 divided by 9% equals $50,000 of net ordinary business income (profit) after expenses and deductions.

This doesn’t factor in the lower audit rate of S Corps versus Schedule C activities, plus the ability to use business funds to pay for your state income taxes otherwise known as the Pass-Thru Entity Tax Deduction (PTET) or the great SALT workaround.

More sales pitch! Keep in mind that our fee of $4,500 includes your individual tax return which you might already be paying another tax professional to prepare. WCG CPAs & Advisors has a handful of clients who are right at the break-even point of $50,000 but leverage an S Corp and our services to get tax return preparation, tax planning and consultation.

No BS

Beyond Sole ProprietorshipWe are not salespeople. We are not putting lipstick on a pig, and trying to convince you to love it, even if Tom Ford’s Wild Ginger looks amazing. Our job remains being professionally detached, giving you information and letting you decide.

Moreover, many CPAs and tax professionals thrust their risk aversion onto their clients. This is bad. At WCG CPAs & Advisors we must perform our due diligence and hurdle our ethical and professional standards. However, after those gymnastics we present a risk-based analysis to the tax return and let you, the client and taxpayer, decide how to proceed. Having said that, we don’t entertain tax scammers or those who can take down the ship. Arthur Anderson anyone? No thanks.

We also see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. Just because you can complicate the crap out of your life doesn’t mean you must. Just like Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea.

Next Steps

Here is a brief summary of the next steps should you want to engage WCG with Business Advisory Services or Tax Patrol-

  1. We schedule an appointment to discuss your needs and ensure that we have the proper resources to help you.
  2. We draft a proposal outlining the scope of services and our fixed annual fee.
  3. If necessary, we schedule another appointment to review the proposal and perhaps tighten things up or make changes.
  4. Once the proposal is signed, the fun begins with onboarding. We have an extensive checklist and internal task list to properly onboard you and your business. Some things are concurrent (such as gathering housekeeping docs and setting up payroll) and some things are sequential (for example, collecting financial data and then offering salary recommendations and creating a tax plan). Onboarding is like having a baby; a SWAT team shows up and does a zillion things, and poof, everyone is gone except for mom and baby.
  5. After onboarding (usually 4-6 weeks), things settle down into a rhythm- Tax preparation in the spring, tax planning in the summer, with payroll and routine consultation bouncing along throughout the year.

New S Corp Puppy

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Business Formation

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Late S Corp Election

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Our Business Expertise

Beyond Sole ProprietorshipAs mentioned elsewhere we primarily focus on small business owners and their unique consultation and tax preparation needs. With over 60 full-time consultation professionals including Certified Public Accountants, Enrolled Agents and Certified Financial Planners on your team, WCG CPAs & Advisors consults on custom business structures, multiple entity arrangements, S corp elections (even late S corp elections back to January), tax strategies, business coaching, industry analysis, executive benefits, retirement planning including individual 401k plans, exit strategies, business valuations, income tax planning and modeling, and tax representation.

We also work with business law attorneys for business owners who have additional needs such as drafting Operating Agreements, fee for service contracts, buying or selling a business including employee stock ownership plans and partner buy-ins. In addition, WCG coordinates with third party plan administrators create age-based profit sharing plans and cash balance (defined benefit) plans. We can run point on whatever your business needs to ensure that communication is effective and efficient allowing you to sell widgets.

Here are some additional resources you might find useful.

Periodic Business Review

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Tax Planning

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Business Tax Deductions

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Online Accountant

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Business Support Portal

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Tax Center

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WCG CPAs & Advisors is a full-service yet boutique progressive tax, accounting and business consultation firm located in Colorado serving clients worldwide.

Late LLC Formation with S Corp Election

One of the situations we face often is when taxpayers are operating as a sole proprietor without an LLC or other entity structure. This doesn’t allow for an S Corp election and subsequent tax savings. So, what can be done? We create an LLC immediately and elect it to be taxed as an S corporation. Next, we allocate income and expenses between the sole proprietorship and the S Corp using the date of inception. Finally, we explore shifting the remaining income by issuing a 1099-MISC from the sole proprietorship using your SSN to the S corporation’s EIN (income nomination). This income shift is not a slam-dunk recommendation and needs extended discussion.

Self Employed 401k Plan

Now that you can save thousands of dollars in self employment taxes with an S Corp election, you should invest that wisely. WCG (formerly Watson CPA Group) is a small business too, and we understand that any extra dollars usually get invested back into the growing company. Having said that, there are several small business retirement plans which include solo 401k plans, profit sharing plans, cash balance and defined benefits pensions.

For example, with a solo 401k plan piggybacked with a defined benefits pension, you could sock away over $192,000 at age 50. All tax deferred if you like, which could yield a savings of over $86,000 (assuming a 45% marginal tax rate with federal and state). Wow!

Note how we purposely did not mention SEP IRAs. These are old school and are usually designed to be crisis management tools (after the fact) rather than good planning tools. Read more about the various self employed retirement options, including retirement tax bombs and the difference between tax deferral and tax savings below-

Self-Employed Retirement

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Turbo Charged 401K Plans

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Self Directed IRA

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Self Directed IRA Problems

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Retirement Tax Bomb

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Tax Deferral Concerns

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Please contact us today to get started on the late S corp election. All the cool kids are doing it- well, most, and we’ll have to ask several questions to make sure the fit is right.

Table Of Contents

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Professional Consultation

Did you want to chat about this? Do you have any questions for us? Let’s chat!

The tax advisors and business consultants at WCG are not salespeople; we are not putting lipstick on a pig expecting you to love it. Our job remains being professionally detached, giving you information and letting you decide within our ethical guidelines and your risk profiles.

We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. As Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea. In other words, let’s not automatically convert “you can” into “you must.” Yes, it is fun to brag about how complicated your world is at cocktail parties, but let’s not unnecessarily complicate it for the bragging rights.

Let’s chat so you can be smart about it.

We typically schedule a 20-minute complimentary quick chat with one of our Partners or Senior Tax Professionals to determine if we are a good fit for each other, and how an engagement with our team looks. Tax returns only? Business advisory? Tax prep, and more importantly tax strategy and planning?

Should we need to schedule an additional consultation, our fee is $250 for 40 minutes. Fun! If we decide to press forward with a Business Advisory or Tax Patrol Services engagement, we will credit the consultation fee towards those services.

Text WCG Offices

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Call Our Amazing Team

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Chat With a Tax Pro

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We’ve worked with multiple bookkeepers and accountants over the years and WCG has completely blown us away.

N. Sellden

See Review

After almost 6 years with this CPA group, there is NO ONE else we would trust to do our taxes.

L. Matisek

See Review

After almost 6 years with this CPA group, there is NO ONE else we would trust to do our taxes.

L. Matisek

See Review