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California pass-thru entity new tax election: questions re LLCs
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Taxed and Spent
Jul 29, 2021, 11:37:40 AM7/29/21
to
Taxpayer has a single member LLC. Currently, income is reported
directly on taxpayer's Federal 1040 and California 540 personal income
tax returns.
For taxpayer to achieve the benefits provided by the new California
pass-thru entity new tax election, I believe the following is required:
1. File IRS Form 8832 to elect to have the SMLLC taxed as a corporation.
2. File IRS Form 2553 to elect to have the SMLLC treated as a Subchapter
S corporation.
3. File California and Federal Subchapter S tax returns.
4. Revoke the elections under items 1 and 2 above when appropriate or
desirable, but no sooner than 5 years after making the elections.
Is this correct?
Question: Once filing Subchapter S tax returns in California, does the
LLC still have to file annual LLC tax returns and pay the LLC tax and
annual fee in addition to the Subchapter S taxes paid to California?
Thanks for any replies and any other thoughts.
--
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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directly on taxpayer's Federal 1040 and California 540 personal income
tax returns.
For taxpayer to achieve the benefits provided by the new California
pass-thru entity new tax election, I believe the following is required:
1. File IRS Form 8832 to elect to have the SMLLC taxed as a corporation.
2. File IRS Form 2553 to elect to have the SMLLC treated as a Subchapter
S corporation.
3. File California and Federal Subchapter S tax returns.
4. Revoke the elections under items 1 and 2 above when appropriate or
desirable, but no sooner than 5 years after making the elections.
Is this correct?
Question: Once filing Subchapter S tax returns in California, does the
LLC still have to file annual LLC tax returns and pay the LLC tax and
annual fee in addition to the Subchapter S taxes paid to California?
Thanks for any replies and any other thoughts.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
Taxed and Spent
Sep 20, 2021, 2:43:41 PM9/20/21
to
On 7/29/2021 8:33 AM, Taxed and Spent wrote:
> Taxpayer has a single member LLC. Currently, income is reported
> directly on taxpayer's Federal 1040 and California 540 personal income
> tax returns.
>
> For taxpayer to achieve the benefits provided by the new California
> pass-thru entity new tax election, I believe the following is required:
>
> 1. File IRS Form 8832 to elect to have the SMLLC taxed as a corporation.
>
> 2. File IRS Form 2553 to elect to have the SMLLC treated as a Subchapter
> S corporation.
>
> 3. File California and Federal Subchapter S tax returns.
>
> 4. Revoke the elections under items 1 and 2 above when appropriate or
> desirable, but no sooner than 5 years after making the elections.
>
>
> Is this correct?
>
> Question: Once filing Subchapter S tax returns in California, does the
> LLC still have to file annual LLC tax returns and pay the LLC tax and
> annual fee in addition to the Subchapter S taxes paid to California?
>
> Thanks for any replies and any other thoughts.
>
Wow, have I stumped the stars? LOL.
> Taxpayer has a single member LLC. Currently, income is reported
> directly on taxpayer's Federal 1040 and California 540 personal income
> tax returns.
>
> For taxpayer to achieve the benefits provided by the new California
> pass-thru entity new tax election, I believe the following is required:
>
> 1. File IRS Form 8832 to elect to have the SMLLC taxed as a corporation.
>
> 2. File IRS Form 2553 to elect to have the SMLLC treated as a Subchapter
> S corporation.
>
> 3. File California and Federal Subchapter S tax returns.
>
> 4. Revoke the elections under items 1 and 2 above when appropriate or
> desirable, but no sooner than 5 years after making the elections.
>
>
> Is this correct?
>
> Question: Once filing Subchapter S tax returns in California, does the
> LLC still have to file annual LLC tax returns and pay the LLC tax and
> annual fee in addition to the Subchapter S taxes paid to California?
>
> Thanks for any replies and any other thoughts.
>
Now that I look at this, I believe an LLC must be converted to a
corporation, and Sub S status elected. One cannot simply elect to have
the LLC taxed as a corporation. More complicated, and one would likely
want to convert the corporation back to an LLC when this tax gimmick
vanishes in a few years.
Any thoughts? Anyone writing articles on this specific topic?
Thanks.
John Levine
Sep 21, 2021, 1:34:21 AM9/21/21
to
According to Taxed and Spent <nospam...@nonospam.com>:
column on page 5 it says
Do not file this form for an eligible entity that
is: ...
* Electing to be classified as an S corporation. An eligible entity
that timely files Form 2553 to elect classification as an S
corporation and meets all other requirements to qualify as an S
corporation is deemed to have made an election under Regulations
section 301.7701-3(c)(v) to be classified as an association taxable as
a corporation.
The instructions for Form 2553 say "A corporation or other entity
eligible to be treated as a corporation files this form to make an
election under section 1362(a) to be an S corporation."
An LLC is an "entity eligible to be treated as a corporation", right?
So I think you file form 2553, say you're the 100% owner, and I
expect the IRS will agree.
No idea about California law, I live in New York.
--
Regards,
John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly
>Now that I look at this, I believe an LLC must be converted to a
>corporation, and Sub S status elected. One cannot simply elect to have
>the LLC taxed as a corporation. More complicated, and one would likely
>want to convert the corporation back to an LLC when this tax gimmick
>vanishes in a few years.
Look at the instructions for form 8832. At the bottom of the first
>corporation, and Sub S status elected. One cannot simply elect to have
>the LLC taxed as a corporation. More complicated, and one would likely
>want to convert the corporation back to an LLC when this tax gimmick
>vanishes in a few years.
column on page 5 it says
Do not file this form for an eligible entity that
is: ...
* Electing to be classified as an S corporation. An eligible entity
that timely files Form 2553 to elect classification as an S
corporation and meets all other requirements to qualify as an S
corporation is deemed to have made an election under Regulations
section 301.7701-3(c)(v) to be classified as an association taxable as
a corporation.
The instructions for Form 2553 say "A corporation or other entity
eligible to be treated as a corporation files this form to make an
election under section 1362(a) to be an S corporation."
An LLC is an "entity eligible to be treated as a corporation", right?
So I think you file form 2553, say you're the 100% owner, and I
expect the IRS will agree.
No idea about California law, I live in New York.
--
Regards,
John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly
Stuart O. Bronstein
Sep 21, 2021, 1:49:21 AM9/21/21
to
Taxed and Spent <nospam...@nonospam.com> wrote:
> Now that I look at this, I believe an LLC must be converted to a
> corporation, and Sub S status elected. One cannot simply elect to
> have the LLC taxed as a corporation. More complicated, and one
> would likely want to convert the corporation back to an LLC when
> this tax gimmick vanishes in a few years.
That's how it was in the beginning - first file the 8832 and t hen the
> Now that I look at this, I believe an LLC must be converted to a
> corporation, and Sub S status elected. One cannot simply elect to
> have the LLC taxed as a corporation. More complicated, and one
> would likely want to convert the corporation back to an LLC when
> this tax gimmick vanishes in a few years.
2553. They even let you put them in the same envelope. But soon, I
suppose, the IRS decided that they didn't actually need all that
paperwork. So it was changed to only needing the 2553. I mean, if an
LLC files a 2553 there's nothing else it can mean. There is no
confusion to avoid. So that's all you need.
--
Stu
http://DownToEarthLawyer.com
Taxed and Spent
Sep 21, 2021, 10:19:52 AM9/21/21
to
On 9/20/2021 10:31 PM, John Levine wrote:
> According to Taxed and Spent <nospam...@nonospam.com>:
>> Now that I look at this, I believe an LLC must be converted to a
>> corporation, and Sub S status elected. One cannot simply elect to have
>> the LLC taxed as a corporation. More complicated, and one would likely
>> want to convert the corporation back to an LLC when this tax gimmick
>> vanishes in a few years.
>
> Look at the instructions for form 8832. At the bottom of the first
> column on page 5 it says
>
> Do not file this form for an eligible entity that
> is: ...
>
> * Electing to be classified as an S corporation. An eligible entity
> that timely files Form 2553 to elect classification as an S
> corporation and meets all other requirements to qualify as an S
> corporation is deemed to have made an election under Regulations
> section 301.7701-3(c)(v) to be classified as an association taxable as
> a corporation.
>
> The instructions for Form 2553 say "A corporation or other entity
> eligible to be treated as a corporation files this form to make an
> election under section 1362(a) to be an S corporation."
>
> An LLC is an "entity eligible to be treated as a corporation", right?
>
> So I think you file form 2553, say you're the 100% owner, and I
> expect the IRS will agree.
>
> No idea about California law, I live in New York.
>
This is more a question about the new California law than the old
> According to Taxed and Spent <nospam...@nonospam.com>:
>> Now that I look at this, I believe an LLC must be converted to a
>> corporation, and Sub S status elected. One cannot simply elect to have
>> the LLC taxed as a corporation. More complicated, and one would likely
>> want to convert the corporation back to an LLC when this tax gimmick
>> vanishes in a few years.
>
> Look at the instructions for form 8832. At the bottom of the first
> column on page 5 it says
>
> Do not file this form for an eligible entity that
> is: ...
>
> * Electing to be classified as an S corporation. An eligible entity
> that timely files Form 2553 to elect classification as an S
> corporation and meets all other requirements to qualify as an S
> corporation is deemed to have made an election under Regulations
> section 301.7701-3(c)(v) to be classified as an association taxable as
> a corporation.
>
> The instructions for Form 2553 say "A corporation or other entity
> eligible to be treated as a corporation files this form to make an
> election under section 1362(a) to be an S corporation."
>
> An LLC is an "entity eligible to be treated as a corporation", right?
>
> So I think you file form 2553, say you're the 100% owner, and I
> expect the IRS will agree.
>
> No idea about California law, I live in New York.
>
Federal election situation.
Taxed and Spent
Sep 21, 2021, 10:19:52 AM9/21/21
to
On 9/20/2021 10:46 PM, Stuart O. Bronstein wrote:
> Taxed and Spent <nospam...@nonospam.com> wrote:
>
>> Now that I look at this, I believe an LLC must be converted to a
>> corporation, and Sub S status elected. One cannot simply elect to
>> have the LLC taxed as a corporation. More complicated, and one
>> would likely want to convert the corporation back to an LLC when
>> this tax gimmick vanishes in a few years.
>
> That's how it was in the beginning - first file the 8832 and t hen the
> 2553. They even let you put them in the same envelope. But soon, I
> suppose, the IRS decided that they didn't actually need all that
> paperwork. So it was changed to only needing the 2553. I mean, if an
> LLC files a 2553 there's nothing else it can mean. There is no
> confusion to avoid. So that's all you need.
>
>
This question pertains to the NEW California law. "in the beginning" is
> Taxed and Spent <nospam...@nonospam.com> wrote:
>
>> Now that I look at this, I believe an LLC must be converted to a
>> corporation, and Sub S status elected. One cannot simply elect to
>> have the LLC taxed as a corporation. More complicated, and one
>> would likely want to convert the corporation back to an LLC when
>> this tax gimmick vanishes in a few years.
>
> That's how it was in the beginning - first file the 8832 and t hen the
> 2553. They even let you put them in the same envelope. But soon, I
> suppose, the IRS decided that they didn't actually need all that
> paperwork. So it was changed to only needing the 2553. I mean, if an
> LLC files a 2553 there's nothing else it can mean. There is no
> confusion to avoid. So that's all you need.
>
>
NOW.
Stuart O. Bronstein
Sep 21, 2021, 11:59:57 AM9/21/21
to
Taxed and Spent <nospam...@nonospam.com> wrote:
> This question pertains to the NEW California law. "in the
> beginning" is NOW.
I just took a look at the legislation. It just says that it has to be
> This question pertains to the NEW California law. "in the
> beginning" is NOW.
an S-corporation or an entity taxed as one. How it gets there is
irrelevant. If you file the 2553 it will qualify as an S-corporation.
I have no idea why you think that California law would trump federal
law in determining if something is taxed as an S-corporation. It
doesn't. No 8832 is necessary.
--
Stu
http://DownToEarthLawyer.com
Stuart O. Bronstein
Sep 21, 2021, 12:04:58 PM9/21/21
to
Taxed and Spent <nospam...@nonospam.com> wrote:
> John Levine wrote:
>> Taxed and Spent <nospam...@nonospam.com>:
>>> Now that I look at this, I believe an LLC must be converted to a
>>> corporation, and Sub S status elected. One cannot simply elect
>>> to have the LLC taxed as a corporation. More complicated, and
>>> one would likely want to convert the corporation back to an LLC
>>> when this tax gimmick vanishes in a few years.
>>
>> Look at the instructions for form 8832. At the bottom of the
>> first column on page 5 it says
>>
>> Do not file this form for an eligible entity that
>> is: ...
>>
>> * Electing to be classified as an S corporation. An eligible
>> entity that timely files Form 2553 to elect classification as an
>> S corporation and meets all other requirements to qualify as an S
>> corporation is deemed to have made an election under Regulations
>> section 301.7701-3(c)(v) to be classified as an association
>> taxable as a corporation.
>>
>> The instructions for Form 2553 say "A corporation or other entity
>> eligible to be treated as a corporation files this form to make
>> an election under section 1362(a) to be an S corporation."
>>
>> An LLC is an "entity eligible to be treated as a corporation",
>> right?
>>
>> So I think you file form 2553, say you're the 100% owner, and I
>> expect the IRS will agree.
>
>> Taxed and Spent <nospam...@nonospam.com>:
>>> Now that I look at this, I believe an LLC must be converted to a
>>> corporation, and Sub S status elected. One cannot simply elect
>>> to have the LLC taxed as a corporation. More complicated, and
>>> one would likely want to convert the corporation back to an LLC
>>> when this tax gimmick vanishes in a few years.
>>
>> Look at the instructions for form 8832. At the bottom of the
>> first column on page 5 it says
>>
>> Do not file this form for an eligible entity that
>> is: ...
>>
>> * Electing to be classified as an S corporation. An eligible
>> entity that timely files Form 2553 to elect classification as an
>> S corporation and meets all other requirements to qualify as an S
>> corporation is deemed to have made an election under Regulations
>> section 301.7701-3(c)(v) to be classified as an association
>> taxable as a corporation.
>>
>> The instructions for Form 2553 say "A corporation or other entity
>> eligible to be treated as a corporation files this form to make
>> an election under section 1362(a) to be an S corporation."
>>
>> An LLC is an "entity eligible to be treated as a corporation",
>> right?
>>
>> So I think you file form 2553, say you're the 100% owner, and I
>> expect the IRS will agree.
>
> This is more a question about the new California law than the old
> Federal election situation.
For that purpose it's an issue of federal law, not state law.
> Federal election situation.
But for the thing that is an issue of state law, you are incorrect.
The California legislation applies to an LLC taxed either as an S-
corporation or as a partnership.
--
Stu
http://DownToEarthLawyer.com
Taxed and Spent
Sep 21, 2021, 2:00:04 PM9/21/21
to
On 9/21/2021 8:57 AM, Stuart O. Bronstein wrote:
> Taxed and Spent <nospam...@nonospam.com> wrote:
>
>> This question pertains to the NEW California law. "in the
>> beginning" is NOW.
>
> I just took a look at the legislation. It just says that it has to be
> an S-corporation or an entity taxed as one. How it gets there is
> irrelevant. If you file the 2553 it will qualify as an S-corporation.
> I have no idea why you think that California law would trump federal
> law in determining if something is taxed as an S-corporation. It
> doesn't. No 8832 is necessary.
>
I think that is correct. Now I don't know why I changed my opinion from
> Taxed and Spent <nospam...@nonospam.com> wrote:
>
>> This question pertains to the NEW California law. "in the
>> beginning" is NOW.
>
> I just took a look at the legislation. It just says that it has to be
> an S-corporation or an entity taxed as one. How it gets there is
> irrelevant. If you file the 2553 it will qualify as an S-corporation.
> I have no idea why you think that California law would trump federal
> law in determining if something is taxed as an S-corporation. It
> doesn't. No 8832 is necessary.
>
what I first thought. Thanks. I just checked - My incorrect second
opinion was the result of poorly worded articles - several of them.
So the next question is:
The LLC has paid their LLC fee and tax for 2021, in advance, as is required.
I believe being taxed as a S Corporation requires advance payment of
corporate fees and taxes for 2021, which was not done.
How does the LLC advance payments get credited to serve as the S
Corporation's advance payments for 2021?
Thanks. This has been very helpful.
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