Payments and Penalties

I didn’t do payroll in 2021, what do I do???

I didn’t do may 2020 taxes until July 21 of this year because of the Texas freeze and the extension the it’s gave us. My previous cpa said I should retroactively file as an scorp for 2020 since I make 500k+. We did that, everything was fine. I’m looking for a new cpa that handles scorp filings since my old one doesn’t do taxes anymore and read I was supposed to do payroll for 2021 to file this year. Which I didn’t, I had no idea. I’m reading the first year was fine since it’s year 1 , but even though the irs accepted my llc as an scorp in July I guess this is year 2? So I’m freaking out. I wasnt trying to evade payroll taxes, I have the 120k I’m estimating I owe this year. But I’m reading I’ll owe double as a fee? Very anxious, please help.


Bryan, greetings from a Texas CPA.

I would be happy to have you come aboard as a tax client.

Technically, the shareholder of an S corporation should be on payroll, receiving a reasonable compensation, from day one. However, what you read, that the IRS MIGHT give you a pass for the first year, is correct. So, yes, you’ll probably be alright for year 1. Of course, that is partly contingent on whether they see that you’re following the rules in subsequent years.

If you filed the S election and made it retroactive back to 2020, then 2020 was year 1, even if it was not a complete year. In this case, 2021 would be year 2 for you. So, yes, you are a whole year late in doing payroll. Being this late, the best we can do now is damage control, to mitigate the problem.

If you are interested in having a phone call to discuss issue, I can probably take your call between 7:00 AM and 9:00 AM this morning (Tuesday, January 11, 2022). Otherwise, the rest of my day is booked at the moment (although I would be available this evening after 7:00 PM). I’d be available again tomorrow (on Wednesday), after 5 PM (as I already have meetings scheduled for tomorrow). My hourly rate for purely consulting is $200.00 per hour. During the call, we can discuss your questions and possible solutions. My direct number is (210) 413-4019. I don’t round up on time. I’m more interested in helping individuals like you and bringing them on as continuing clients than charging for consulting.

You can find my CPA firm (Adam Dickreiter, CPA, PLLC) by doing a Google search. I am located in San Antonio. If you’re not in San Antonio or the surrounding area, that’s not an issue, as we can still interact from a distance.

Answer Provided by: Adam Dickreiter Adam Dickreiter

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