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- Oct 10, 2019
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Hello!
We have used Incfile to form an LLC and elected to be taxed as S-corp (form 2553). Incfile confirmed the form was filed by fax within 1 week after registering the LLC. Calling IRS did not bring any news or reference and now 6 months later, still no sign of activity by IRS. We faxed the form 2553 once again recently with a cover letter explaining that this was faxed within the deadline of 75 days already but not processed by IRS. Still no answer. We would want the LLC to be taxed as S-corp, but as far as I am aware, without S-corp election, the LLC can`t pay its owners a wage. Now, if IRS did accept the S-corp election, they will ask why not reasonable compensation was paid to the owner, and if S-corp election was not accepted, than paying a wage would be a violation. The end of the year is approaching and we don't know how to handle this situation. Is it possible to start paying W-2 salaries to the owners based on our (not confirmed) election or do we need to wait for IRS confirmation? What happens if an LLC pays W2 wages to the owners and the IRS does NOT accept the S-corp election? Will there be a penalty?
We have used Incfile to form an LLC and elected to be taxed as S-corp (form 2553). Incfile confirmed the form was filed by fax within 1 week after registering the LLC. Calling IRS did not bring any news or reference and now 6 months later, still no sign of activity by IRS. We faxed the form 2553 once again recently with a cover letter explaining that this was faxed within the deadline of 75 days already but not processed by IRS. Still no answer. We would want the LLC to be taxed as S-corp, but as far as I am aware, without S-corp election, the LLC can`t pay its owners a wage. Now, if IRS did accept the S-corp election, they will ask why not reasonable compensation was paid to the owner, and if S-corp election was not accepted, than paying a wage would be a violation. The end of the year is approaching and we don't know how to handle this situation. Is it possible to start paying W-2 salaries to the owners based on our (not confirmed) election or do we need to wait for IRS confirmation? What happens if an LLC pays W2 wages to the owners and the IRS does NOT accept the S-corp election? Will there be a penalty?