Electing to be taxed as an S Corporation can be one of the most powerful strategies for business owners in North Carolina to reduce self-employment tax. But like most things with the IRS, timing and structure matter—and a last-minute S Corp setup can backfire.

At Polaris Tax & Accounting, we’ve seen it too many times: business owners rushing into an S Corp election without proper planning—and paying the price later.

What Happens When You Rush It?

❌ You Miss Required Payroll Setup

The IRS expects you to pay yourself a “reasonable salary” as an officer of an S Corp. If you haven’t set up payroll properly or backdated paychecks, it can trigger audits and penalties.

❌ You May Owe Back Payroll Taxes

Skipping payroll doesn’t make you smarter—it makes you liable. Once you’re an S Corp, you need to handle quarterly payroll filings, W-2s, and employer taxes.

❌ You Lose Deductions from Improper Timing

Waiting until year-end to switch to an S Corp often means missed planning opportunities. Many deductions are tied to how and when expenses are allocated—and timing matters.

❌ You Might Not Qualify Retroactively

The IRS doesn’t always approve late elections. Even if you file Form 2553 late, you need to justify why. A simple “I forgot” isn’t always enough.

The Right Way to Do It

An S Corp can still be a huge win—but it needs to be:

  • Set up with proper payroll systems in place

  • Supported by strong bookkeeping

  • Reviewed regularly for compliance and savings

We walk our clients through the entire process—from election timing to salary planning to entity restructuring if needed.

Don’t Risk a Fix-It Filing

Before you jump into an S Corp setup—or if you think your current setup may be off—talk to us first. A quick review now can prevent thousands in penalties, back taxes, or missed savings later.

👉 Schedule a confidential consultation now