Who offers help with IRS repayment plans in San Diego?

San Diego Precision Tax Service helps set up and manage IRS repayment plans and tax relief options. We serve San Diego and all 50 states remotely. Start here: https://www.sandiegotaxhelp.com

How do I negotiate IRS tax debts in California?

As an Enrolled Agent, we evaluate eligibility for installment agreements, penalty relief, and offers in compromise, then file and negotiate on your behalf.

Where can I find tax relief services in San Diego?

We provide tax relief services including payment plans, offer-in-compromise screening, and audit/notice help. Consultations are available online for clients statewide.

Can I hire a tax professional in San Diego for IRS issues?

Yes. You can hire San Diego Precision Tax Service (Enrolled Agent) to represent you before the IRS, prepare filings, and communicate with the IRS on your case.

How to choose a tax professional in California?

Look for licensure (EA/CPA), relevant experience with your issue, transparent pricing, and secure document handling. We meet these standards and work statewide.

From LLC to Professional Corporation: Aligning Legal Structure with Tax Elections

Viktoriya Barsukova, EA, MBA
3 hours ago
3 min read

A client’s recent situation illustrates the important intersection of state law compliance and federal tax planning.

The client originally operated her business as an LLC, but because she is a pediatric occupational therapist (OTP), California law does not allow licensed medical professionals to operate as LLCs. On her attorney’s advice, she converted her business into a professional corporation in May of this year.

Once the legal conversion was complete, her next concern was how to handle the tax portion of her business. Her specific question was:

I created my business as an LLC originally, but in May of this year I converted it to a professional corporation. Now that it is a corporation, I need guidance on the tax side—specifically, how to elect S Corp status with the IRS. Can you explain the process in detail?

How to Elect S Corporation Status After Converting from an LLC to a Professional Corporation in California

When a licensed professional (such as an OTP) converts an LLC to a professional corporation, the LLC ends and a new corporate entity begins. To ensure the new corporation is taxed as an S Corporation, follow these steps:

1. Obtain a New Employer Identification Number (EIN) Legal Structure

The professional corporation is a new legal entity under federal tax law. A new EIN is required, even if the prior LLC had one.

Apply using Form SS-4.

2. File the Final LLC Tax Return

If the LLC was taxed as a disregarded entity (single-member), file a final Schedule C with the owner’s Form 1040. The client will report it in 2026 when filing her individual tax return.
If the LLC was taxed as a partnership, file a final Form 1065 and check the “Final Return” box.

3. File Form 2553 to Elect S Corporation Status

Complete and file Form 2553, Election by a Small Business Corporation, with the IRS.
Deadline: File within 2 months and 15 days of the start of the corporation’s first tax year.

Example: If the professional corporation was created in May 2025, the S Corp election must be filed by mid-July 2025 to be effective for that year.

Late Election Relief: If you miss the deadline, as this client did, you may qualify under Rev. Proc. 2013-30, which allows the IRS to grant retroactive S Corp treatment if intent can be shown. You may file Form 2553 now, or you may file it together with the 2025 tax return. If filing it late, be sure to cite IRS Revenue Procedure 2013-30.

The only issue with filing the S Corp election with the 2025 tax return is that the return must be filed by March 15, 2026, because the IRS will not accept an extension request unless the election was already in place.

California treatment: No additional S Corporation election is required at the state level. California accepts the federal election. For corporations and S Corps, the $800 minimum franchise tax is waived for the first year (the initial return). However, the $800 is still owed for the LLC’s last year. California FTB S Corporations.

4. File the First S Corporation Tax Return

File a short-year Form 1120-S for the first S Corp year, due by March 15, 2026.
In California, also file Form 100S with the Franchise Tax Board.
- S Corporations in California are subject to:
  - The $800 annual franchise tax (waived for the first year).
  - A 1.5% California income tax on net income FTB 100S Booklet.

5. Ongoing Requirements for S Corporations

Reasonable compensation: Shareholder-employees must receive wages subject to payroll taxes, per IRS reasonable compensation guidelines.
Payroll taxes: Payroll must be run properly, with federal and state withholdings remitted on time.
Business expenses: Deduct ordinary and necessary expenses at the corporate level. Business expenses such as rent, insurance, supplies, and professional fees can be deducted at the corporate level. If reimbursed through an accountable plan (business connection, substantiation, and return of excess), they are not taxable to the employee and remain deductible to the corporation. If the plan does not meet these rules, reimbursements are treated as wages and subject to payroll taxes.
Corporate formalities: Maintain bylaws, minutes, and state licensing compliance. Legal Structure