Wages should be based on the work they perform, not the percentage of stock that they own.

Complete and file Form 2553:

--No more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or
--At any time during the tax year preceding the tax year it is to take effect.

But there is “relief for late elections.” See the Form 2553 instructions.

TIGTA just issued an interesting report on S Corporation payroll tax avoidance.

https://www.treasury.gov/tigta/auditreports/2021reports/202130042fr.pdf

@BobKamman   you are right, that is an interesting report. Not one I will be sharing with my SCorp clients.

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@taxman40 wrote:

They want to elect for Scorp taxation

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Have you advised them of the pros and cons?  Have you determined if that is the best option for their situation?

Just because the client says they want to do it, doesn't necessarily mean it is a good idea.

But Bill, surely you have heard the old line "the customer is always right" 😉