Tax Credits

Question: How Late Is Too Late to Request a Late S Election? Answer: Late in 2020, the IRS issued a Private Letter Ruling related to a late S election request for relief. Generally, you must file a request to become an S corporation no later than the 15th day of the third month of the taxable year for which the election is to take effect. If you miss this deadline, or don’t file an election at all, the business is generally considered a C corporation or LLC. If you’re like most business owners, however, you may not have known at the time you formed your business all the tax benefits available to you by holding your business as an S corporation. Whether you were unaware, or for some other reason, it may be well past the official IRS deadline to make this request for the current or recently ended tax year. If you haven’t yet filed your tax returns at all, you may be qualified to use the relief available by following the proper procedures. You may also wonder, “How far back can I go in changing the way my business income is taxed?” To learn more about how far back and how long you can be “fashionably late,” continue reading.

As 2020 winds to a close, we have seen many beneficial programs provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Families First Coronavirus Response Act (FFCRA). While most media coverage has focused on loans to employers such as PPP and EIDL, it is important to remember some of the lesser covered programs also included in the tax relief programs. In fact, eligible businesses may qualify to get cash back in some instances. The employee retention credit (ERC) under the CARES Act offers a refundable payroll tax credit for certain wages and health plan expenses paid by businesses during the economic hardship. However, many business owners have uncertainty as to how to qualify when they have also received a PPP loan. The paid sick leave and paid family medical leave credits also offer a refundable tax credit for qualifying wages and Medicare tax and health plan expenses. These refundable tax credits are stackable for maximum benefit when used correctly. Read on to discover how to qualify.