What an S-Corp CPA in Dallas Does After You Elect

I'm Krystal Le, CPA. I run Krystal Le CPA Co LLC from Garland, and I work with Dallas–Fort Worth owner-operators who have already made — or are about to file — the S-Corp election.

When someone searches S-Corp CPA DFW or S corp accountant Dallas, they are usually past the “should I elect?” stage. They want to know what happens next: who files Form 2553, how a reasonable salary gets set, how owner payroll actually runs, and who prepares the 1120-S and K-1s.

This is that explainer. Not another LLC vs S-Corp bake-off. If you still need the decision, start on LLC vs S-Corp — that page (and the related Texas explainer) already own it. If you want the work done, that is the S-Corp service. Book a free consultation when you are ready to talk through your year.

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The job after you elect

An S-Corp is a federal tax election, not a Texas Secretary of State entity. The IRS S corporations page is blunt about the filing loop that follows: Form 1120-S and Schedule K-1 at the entity, employment taxes if you have wages, and a Form 1040 with Schedule E at the shareholder.

The work I do after you elect sits in four buckets.

1. File and track Form 2553. About Form 2553, Election by a Small Business Corporation is the election. I prepare it, get every required shareholder consent, file it, and follow up if the IRS does not confirm acceptance. If you already missed the window, we talk about late-election relief — not a promise that every late filing is accepted.

2. Set a defensible reasonable salary. Before you take non-wage distributions, the IRS expects reasonable compensation for the work you actually do. I document that number for a DFW role, not a national blog percentage.

3. Put you on owner payroll. A salary that exists only in a memo is not a salary. You need W-2 wages, withholdings, and the quarterly employment-tax calendar. Payroll is the processing. This engagement is why it has to exist.

4. File Form 1120-S and get K-1s to the owners. About Form 1120-S is the annual S corporation return. Shareholders report their share on Form 1040, Schedule E. That is tax preparation sitting on top of books I can trust.

If you do not have a Texas entity yet, stop here and start with entity formation. There is nothing to elect until there is something to elect on.

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Form 2553: on time, or the relief the instructions actually name

The Instructions for Form 2553 say to complete and file the election:

• no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or
• at any time during the tax year preceding the year it is to take effect.

For a calendar-year company, that current-year window is generally March 15. You can also file any time in the prior year and have the election take effect on January 1. All required shareholders have to consent. An officer authorized to sign has to sign. An unsigned Form 2553 is not a timely Form 2553.

A timely Form 2553 can make Form 8832, Entity Classification Election unnecessary — the 2553 instructions say an eligible entity that meets the tests is treated as a corporation as of the S election’s effective date and does not need a separate 8832. I do not sell a mystery second election.

After you file, the service center notifies you if the election is accepted and when it takes effect. The instructions say you should generally hear within 60 days; if you do not, follow up with proof of filing. Do not file Form 1120-S for a year before the election takes effect.

Missed the deadline? The same instructions have a section titled “Relief for Late Elections.” They name Revenue Procedure 2013-30. A late package typically means a completed Form 2553, a reasonable-cause explanation, shareholder consents, and the legend those instructions specify. Relief is not automatic. I will not tell a Dallas owner the IRS accepts every late 2553.

Texas does not have a personal income tax, so the election is a federal tax move. You still keep the LLC (or corporation) in good standing and file the Texas franchise report when it is due. I will not invent a franchise threshold in a blog post.

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Reasonable compensation is the audit surface

This is the part most DFW owners underprice — and the part the IRS writes about in plain English.

The IRS page S corporation compensation and medical insurance issues says an S corporation must pay reasonable compensation to a shareholder-employee for services before non-wage distributions may be made. It also quotes the Form 1120-S instructions: distributions and other payments to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.

The IRS has the authority to reclassify non-wage distributions as wages. The companion page, S corporation employees, shareholders and corporate officers, is just as direct: officers who perform more than minor services and receive — or are entitled to receive — compensation are employees for FICA, FUTA, and withholding. Calling the money a “distribution,” a “draw,” or a “loan” does not change that.

There is no official IRS salary percentage. There is no 50/50 rule in the Internal Revenue Code. Those are blog shortcuts. The IRS test is what you did for the corporation, and what generated the receipts.

That same compensation page tells you to look at the source of gross receipts:

1. Services of the shareholder
2. Services of non-shareholder employees
3. Capital and equipment

To the extent receipts come from your personal services, payments to you belong in wages. Receipts from other employees or from capital and equipment can support more of a non-wage distribution. A manager who does not bill clients still has administrative work that is wage-type work.

The factors the IRS lists are the ones I actually use:

• Training and experience
• Duties and responsibilities
• Time and effort devoted to the business
• Dividend (distribution) history
• Payments to non-shareholder employees
• Timing and manner of bonuses
• What comparable businesses pay for similar services
• Compensation agreements
• Use of a formula to determine compensation

For a Dallas consultant, a Plano agency owner, or a Frisco practice principal, “comparable” means DFW market rates for that role — not a national average and not a percentage of profit I pulled from a forum. I write that down in plain English so we can defend it later.

Want a sketch before we talk? Use the reasonable salary calculator as a tool. It is not the engagement, and it is not the IRS test.

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Owner payroll — even if you are the only employee

A reasonable salary that never hits a payroll system is how S-Corps get letters.

If you work in the business, you are a shareholder-employee. That means:

• Regular W-2 wages (monthly or bi-weekly is what I recommend; once-a-year is how people get into trouble)
• Federal income-tax withholding, Social Security, and Medicare
• Form 941, Employer’s Quarterly Federal Tax Return
• Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
• Year-end W-2 / W-3
• Texas Workforce Commission reporting when it applies

The IRS S corporations page puts employment taxes on the same filing chart as Form 1120-S. This is not optional “if you hire someone.” You are someone.

Health insurance is part of this calendar. For a greater-than-2-percent shareholder-employee, premiums the S corporation pays or reimburses are generally W-2 Box 1 wages — and, when paid under a plan covering employees, they stay out of Boxes 3 and 5. Paying the premium from a personal account and never running it through the W-2 is how the above-the-line deduction disappears. I will put the premium in the right box.

Payroll is the service that runs the calendar. The S-Corp engagement is the reason the calendar exists.

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Form 1120-S, K-1s, and the rest of the year

About Form 1120-S, U.S. Income Tax Return for an S Corporation is the annual return — filed once the IRS has accepted Form 2553 and the election is still in effect. It reports the corporation’s income, deductions, and credits, and it produces a Schedule K-1 for each shareholder.

When it is due. The Instructions for Form 1120-S and Publication 509, Tax Calendars say an S corporation generally files by the 15th day of the 3rd month after year-end — March 15 for a calendar-year company (next business day if that date is a weekend or holiday). K-1s go to shareholders by the same date. Form 7004 can extend the filing deadline; it does not extend payroll deposits or shareholder estimates.

Shareholders pick the K-1 up on Form 1040, Schedule E. That is why tax preparation for an S-Corp owner is a pair of returns, not one. The 1120-S is useless if the books behind it are fiction — bookkeeping is what makes the K-1 a number you can sign.

The election does not retire tax planning. QBI still depends on wages and how you take money out, and the S corporations page reminds shareholders they may still owe estimated tax on Form 1040-ES — a W-2 does not automatically cover the K-1.

If you already have a CP or LTR letter about payroll, a missing 1120-S, or a salary the IRS wants to reclassify, do not answer it from a forum. That is IRS representation.

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What working together looks like

I am a Texas CPA. The firm is Krystal Le CPA Co LLC. I serve Dallas–Fort Worth from 3901 W Walnut St, Suite 107, Garland, TX 75042 — about 15–20 minutes from Downtown. Most S-Corp clients work with me on a secure portal and video. In-person is available Monday–Friday, 9:30 AM–5:00 PM CT. Call (469) 987-0618, or skip the phone tag and book the free consultation.

The engagement, once you are past the decision, looks like this:

1. Free consult and a profit picture. Is the election (or the cleanup) worth the compliance? If you have not decided yet, I send you to LLC vs S-Corp first.
2. Salary position. A reasonable-compensation number documented for your DFW role and what generates the receipts.
3. Form 2553. Timely filing, or a late-relief package that follows the Form 2553 instructions — including Rev. Proc. 2013-30 when that is the path those instructions name. Shareholder consents included.
4. Owner payroll live. First W-2 run and a 941 calendar, through payroll.
5. Annual 1120-S and a mid-year check. K-1s, estimates, and a year-end look at salary versus distributions so January does not become a scramble.

I do not sell a “fractional CFO” package. I sell the CPA work above.

Pricing is quoted after I understand the election, the books, and whether this is a clean 2553 or a late-relief / already-elected cleanup. Our homepage FAQ lists tax-prep starting points (individual returns from $350; small business returns typically $800–$2,500). That is filing copy, not an S-Corp engagement fee. I will not invent a package price in this post.

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When the election already happened and the work is the problem

A lot of the DFW owners who find me did not fail the decision. They failed the year after.

• A formation mill filed something that looks like an S-Corp and never started payroll.
• Salary is $0, or it happens once in December for whatever cash is left.
• Consents were never signed.
• Books cannot separate W-2 wages from owner draws, so the K-1 is a guess.
• An IRS notice is already on the desk.

Those are S-Corp CPA problems. They are not “should I be an LLC?” problems. If the letter is already here, bring it to IRS representation. If the entity was never formed correctly, that is entity formation first, then this work.

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A number you can use — labeled as what it is

I am not going to re-run the LLC vs S-Corp math on this page. The comparison page already published the illustration I will keep using: below roughly $40,000–$50,000 of annual profit, payroll and filing cost often eat the savings; in the $80,000–$200,000 profit range, many owners see $5,000–$15,000 a year. That is a compare-page illustration, not a guarantee and not a fee.

For a sketch of your year, use the S-Corp calculator as a tool, then we quote the engagement. I will not invent your savings, and I will not recycle marketing averages from a calculator page.

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The bottom line

An S-Corp CPA in DFW is not the person who told you to elect and disappeared. After you elect, the job is Form 2553 (on time or the late relief the instructions actually name), a reasonable salary the IRS pages would recognize, owner payroll that runs, and an 1120-S with K-1s you can sign. The decision lives on LLC vs S-Corp. The engagement lives on S-Corp.

I work with Dallas, Plano, Richardson, Frisco, and the rest of DFW from Garland — virtual or in person, Monday–Friday, 9:30 AM–5:00 PM CT. See the S-Corp service for how I run the election, salary, payroll, and return, then book a free consultation and we will decide if the next step is a 2553, a cleanup, or a conversation you do not need me for.

— Krystal Le, CPA

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Krystal Le CPA Co LLC provides S-Corp election, reasonable-compensation, payroll, and tax-preparation work for owner-operators across Dallas–Fort Worth. Office: 3901 W Walnut St, Suite 107, Garland, TX 75042. (469) 987-0618.

Sources:

• IRS: S corporations
• IRS: About Form 2553, Election by a Small Business Corporation
• IRS: Instructions for Form 2553 (late-election relief, including Revenue Procedure 2013-30)
• IRS: S corporation compensation and medical insurance issues
• IRS: S corporation employees, shareholders and corporate officers
• IRS: About Form 1120-S, U.S. Income Tax Return for an S Corporation
• IRS: Instructions for Form 1120-S
• IRS Publication 509: Tax Calendars