Thank you for your information. I really appreciate it. Please tell me why you think that this client doesn't qualify to be taxed as Scorp and would not have filed 2553?

Is the business a single member LLC? You didn't mention. Also, as Bill stated, you need a good reason to have a late S election accepted. You haven't stated one.

yes, it is a single member LLC. the good reason to have a late S election on 2553 is the client didn't know that until now. the former CPA hasn't told him that. Just tell him he needs to do W2 and then he did W-2 for his employees for 3 months and  changed his mind and switched to 1099-MISC. That is the part I am worried a lot. Thank you for your response. Please advise me what I should do?

Why do you think an S Corp is the better option? I think I'd stay Sch C for 2018; have the client get everything in order (such as W-2s for employees) and consider S election for 2020.

I think S Corp fit b/c his income is triple than last year. I faxed 2553 with relief request to IRS a weak ago and wait for approval. If I go ahead and file Sch C for 2018, and then a month later, I receive IRS accepted letter to be S corp, is it complete a mess? What do you think about this situation, thank you very much

I think it is a terrible situation. I would wait to hear from IRS before filing anything.

thanks for your help. I appreciate it 🙂

"the good reason to have a late S election on 2553 is the client didn't know that until now"

What does that mean?  Did the client THINK it already was being taxed as a S-corporation?  I don't think just 'not knowing' what is required is a reasonable cause, and I suspect the IRS could deny it for 2018.


"I think S Corp fit b/c his income is triple than last year"

That doesn't necessarily mean a S-corporation is better (especially with the §199A deduction now).  However, more importantly, it goes back to what the client thought was happening.  If YOU just decided NOW that a S-corporation is a good idea, then the late election is NOT valid because the client was not treating it as a corporation.  Again, the late election generally only applies if the client has acting like a corporation.  Was a S-corporation extension filed before the March 15th due date?  If not, it seems even less likely that the client has been treating it as a corporation.

Thanks for your advice. The client didn't know any thing about S Corp or Corp with the former CPA. He knew that after I explained to him about it.  The former CPA hasn't done any extension filed before March15th due date. I faxed 2553 with relief request to IRS and wait for approval. I don't know if the late election to be S Corp is valid or not. Can you explain to me what requirement for late election be S corp is valid? I really appreciate it.

As I said above, the business must have INTENDED to be taxed as a S-corporation and have "Reasonable Cause" for not filing the election on time.  From you are said, the business did NOT intend to be taxed as a S-corporation until you told him about it, and I don't see any "Reasonable Cause" for not filing the election on time.
https://www.irs.gov/businesses/small-businesses-self-employed/late-election-relief

S Corp = everyone working for the business would be an employee and get payroll and W2; even the shareholder(s). LLC filing 1065 (partnership) or as Sched C (only that one owner) = there is no provision for that owner/partners to be paid through payroll (it's not permitted). If you file as S Corp, and the owner never got paid through payroll, that is another large mess you would be creating.

Thank you very much for all your help.

The "owner" never gets a 1099-Misc from their own entity.