Just experienced this same situation! My incorporation service (LegalZoom) apparently never properly submitted my 2553 even though I paid them to handle it. What a disaster. I ended up hiring a CPA who specialized in business closures. Cost me $650 but they handled everything including dealing with the IRS directly. Sometimes paying a professional is worth avoiding the headache, especially since you can deduct the fee on your personal taxes as an "investment expense" related to closing your business.

I'm dealing with a very similar situation right now! My business formation service also apparently never properly filed my Form 2553, and the IRS is now treating my intended S-Corp as a C-Corp. Based on what I'm reading here, it sounds like the path of least resistance might be to just file the 1120-X and Schedule L they're requesting, especially since there was no business activity. One question though - if I go the route of filing as a C-Corp for the final return, do I need to worry about any state-level complications? My state dissolution was already approved, but I'm wondering if filing a different type of federal return could create issues with the state tax authority or require additional state filings. Also, has anyone had success getting reimbursement from these business formation services when they mess up the S-Corp election? I'm pretty frustrated that I paid extra for them to handle the paperwork correctly and now I'm stuck dealing with this mess.

I think everyone's missing something important here. If your employer isn't including that $650/month on your W-2, they're handling it incorrectly. They should either be treating it as taxable wages (included on your W-2) OR requiring you to substantiate your actual expenses under an accountable plan (in which case it wouldn't be taxable if your actual expenses equaled or exceeded the allowance). You should talk to your payroll department ASAP. They might need to issue a corrected W-2, or they might need to change how they're administering the car allowance program.

This situation is more common than you'd think! I dealt with something very similar last year. The key thing to understand is that your company is essentially running two different reimbursement systems - one accountable (the credit card for documented expenses) and one non-accountable (the flat $650 allowance). Based on what you've described, you'll likely need to report the $7,800 annual allowance ($650 x 12) as "Other Income" on your tax return since it's not tied to substantiated expenses. However, since you're using your personal vehicle for business, you can potentially offset some of this by deducting vehicle expenses that aren't covered by your company's credit card. The tricky part is you can't use the standard mileage rate since your employer is covering gas and maintenance. You'll need to calculate the actual expenses for things like depreciation, insurance, registration fees, and loan interest - but only the business percentage (which sounds like it would be nearly 100% given your 48k miles). I'd strongly recommend getting this clarified with a tax professional since the interaction between the allowance income and allowable deductions can get complex. Also, definitely check with your payroll department about why this isn't appearing on your W-2 - that seems like an error on their part.

Has anyone actually gone through the process of converting from LLC to C Corp? My lawyer is telling me it's a "deemed liquidation" for tax purposes and could trigger unexpected taxes if not handled properly.

This is such a timely question for me! I'm in a similar situation with my marketing consultancy LLC. After reading through all these responses, it sounds like the tax election route (keeping LLC structure but electing C Corp taxation) might be the simpler path for most solo businesses. One thing I'm curious about - for those who have made the C Corp tax election, how did it affect your quarterly estimated tax payments? Did you have to start making corporate estimated payments in addition to personal ones, or does it replace the self-employment tax structure entirely? Also, timing seems important here. Is there a specific deadline for making the tax election if you want it to take effect for the current tax year, or can you make this change at any point?

Quick question - does anyone know if stock in foreign companies purchased through regular US brokerages (like Schwab or Fidelity) trigger Form 5471 requirements? I own shares of some Canadian and European companies through my brokerage account but never considered filing anything special.

Based on what you've described, you're likely correct that you don't need to file Form 5471. With less than 10% ownership in each company and no officer/director role, you wouldn't meet the typical filing requirements under any of the 5 categories. However, I'd be extra careful about the "coordinated group" issue that others have mentioned. The fact that you're part of an 80-person investment group could potentially trigger constructive ownership rules if the IRS determines you're acting in coordination. The key factors they look at are: shared investment vehicles, common decision-making processes, voting agreements, or family/business relationships between investors. Since you mentioned it's a "mix of US citizens and non-US persons," only the US persons would count toward the 50% threshold for constructive ownership. You might want to document how your investment was structured - did everyone invest independently, or was there any kind of organizing entity or shared agreements? For future distributions, you'll report them as foreign dividends on Schedule B and may need to pay taxes on them even if they were already subject to foreign withholding taxes. You can often claim a foreign tax credit to avoid double taxation. Given the severe penalties ($10,000+ per form as mentioned above), it might be worth getting a definitive answer from a tax professional or the IRS directly, especially with the complexity of having 80 investors involved.

Just my 2 cents - I've been preparin taxes for 20 yrs and never got any fancy certifications beyond my EA. Still make great money and have tons of loyal clients. Don't get caught up in credentials, focus on building relationships and doin good work. Most taxpayers dont care about your letters, they care if you save them money and keep them outta trouble!

Having worked at the IRS for 12 years in various departments, I'd strongly recommend considering the federal route, especially given the current hiring push. The benefits package is honestly unbeatable - pension, TSP matching, excellent health insurance, and job security you just don't get in private practice. Yes, the bureaucracy can be frustrating, but the work-life balance is real. I've never missed a family dinner during tax season like my friends in public accounting do. The training is also top-notch - they'll actually invest in your professional development rather than just throwing you into busy season chaos. One thing people don't mention enough is the diversity of work at the IRS. You can move between examination, collections, criminal investigation, taxpayer advocate services, and more. It's not just processing returns all day. Plus, if you do decide to leave later, that IRS experience opens doors everywhere in tax. For Isabella specifically - with your accounting background, you'd likely qualify for GS-12 positions right out of college, which puts you ahead of most entry-level hires. The EA certification is perfect for IRS work and they'll support you getting it.