September 15 is the extended deadline for calendar year S corporations and partnerships. Which means this is the month people discover things. Here is one that comes up more than it should. The situation A two owner service company. Formed as an LLC in early 2024. Their lawyer told them to be an S corporation, their bookkeeper set up payroll, they ran W-2 wages for both owners, they filed a Form 1120-S for 2024 and another for 2025, and both years the K-1s flowed to their 1040s. New client walks in this September. I ask for the acceptance letter. Nobody has one. I pull the account. The IRS has no S election on file. Form 2553 was never sent. It was on the lawyer's checklist, the bookkeeper assumed the lawyer did it, the lawyer assumed the accountant did it. What they actually were A two member LLC with no election is a partnership. So for two years they filed the wrong return, on the wrong form, with the wrong owner compensation treatment, and paid payroll tax on wages that a partnership does not pay to its partners. Left alone this ends badly. The 1120-S filings get treated as unfiled 1120-S returns from an ineligible filer, the partnership returns were never filed at all, and the late filing penalty for a partnership return is $255 per partner per month for returns filed in 2026 and $260 for returns filed in 2027. Two partners, two years, twelve months capped. The exposure runs past $12,000 in penalties before anybody talks about tax. The fix Rev. Proc. 2013-30. It is the most useful revenue procedure a small practice can know, and it is not complicated. - It gives simplified relief for a late S election when the request is made within 3 years and 75 days of the intended effective date. They were inside that window by a comfortable margin. - The entity has to have intended to be an S corporation from that date, and has to have reported consistently as one. They had. Two 1120-S returns, two sets of K-1s, W-2 wages for both owners. Every piece of paper said S corporation. - It needs reasonable cause stated in the request. Not an excuse. A short factual explanation of what happened and why. - The Form 2553 gets filed with FILED PURSUANT TO REV. PROC. 2013-30 written across the top, with the statement of reasonable cause attached and every shareholder signing.

Almost every hour you lose in February was lost in your intake. Fix the front and the rest gets quiet. 1. One organizer, out in December. Same one for everybody. If you are asking each client different questions by memory, you are going to forget one on the client where it mattered. 2. Ask the life change questions up front. Married, divorced, new baby, moved states, bought a house, started a business, took money out of retirement, got a notice. Every one of those changes the return, and none of them come up on their own. 3. Define complete, then hold the line. Write down what a complete file is. Nothing starts until it is complete. Half started returns are what turn one job into four. 4. Collect identification once and store it properly. Encrypted, locked, and with a real answer for who can see it. You are holding the most valuable thing your client owns. 5. Text messages are not a document system. Documents come through the portal. Once you allow one exception you have twelve clients sending you blurry photos at eleven at night and no record of what you received. 6. Send an engagement letter and get it signed. What you are doing, what you are not doing, what it costs, and what happens if they give you bad information. It is the cheapest protection you will ever buy. 7. Set the turnaround in writing before you start. When you will have it, how they hear from you, and what happens if something is missing. Almost every angry call is really a call about an expectation nobody set. None of this is glamorous. All of it buys back your February. General information for tax professionals, not advice on any one client's facts. Figures move. Check the current ones with the IRS before you rely on them. CG6LLC

This one is quiet and it is going to catch a lot of offices in January. The 1099 reporting thresholds changed for payments made in 2026. Your clients are making those payments right now, and the bookkeeping decision has to happen before December, not after. What changed - Forms 1099-NEC and 1099-MISC: the threshold is now $2,000 for payments made after December 31, 2025. It was $600 for twenty years. The $600 figure still applies to anything paid before 2026, so the returns you filed in January used the old rule and the returns you file next January will not. - The $2,000 amount gets indexed for inflation after 2026, so it will keep moving. Do not memorize it, look it up each year. - Form 1099-K went back to more than $20,000 and more than 200 transactions. Both conditions, not either one. That is the pre 2021 rule returning. The trap A business client hears the threshold went up and concludes the payment does not count. The reporting threshold is not the taxability threshold. A contractor who gets paid $1,800 and never receives a 1099-NEC still owes tax on $1,800. Your client still deducts it if it is a real business expense. Nothing about the deduction or the income changed. Only the piece of paper changed. So the risk cuts both ways. The contractor who has been relying on the 1099 to tell him what he made now gets less paper and reports less income. The business owner who thinks no 1099 means no deduction leaves money on the table. What to tell business clients this month 1. Keep collecting a Form W-9 from every vendor before the first payment, regardless of the amount. The threshold changed. The reason you collect the W-9 did not, and chasing a taxpayer identification number in January is miserable. 2. Keep tracking every vendor payment in the books, not just the ones over the threshold. You do not know at payment number one where the year will land. 3. If a vendor is a corporation, most payments were never reportable anyway. That has not changed. Attorney fees still are. 4. Warn any client who works on contract that fewer 1099s are coming and their own records now carry the whole load.