S-Corporation Election & Reasonable Salary Audit Sheet
Printable 1-page due diligence checklist to audit IRS Form 2553 deadlines, reasonable compensation benchmarks, and quarterly payroll tax filings.
S-CORP ELECTION & REASONABLE SALARY AUDIT
IRS Form 2553 Timing, FICA Optimization & Audit Defensibility Protocol • 2026 Edition
Entity Legal Name
__________________
Projected Net Profit
$ ________________
W-2 Reasonable Salary
$ ________________
Tax Classification
Subchapter S Corp
1. IRS Form 2553 Filing & Deadlines
Timely Election: Filed within 2 months and 15 days of tax year start (March 15th).
Late Election Relief: Revenue Procedure 2013-30 reasonable cause statement prepared if late.
Member Consent: All LLC managing members signed Part I shareholder consents.
IRS Acceptance Letter: CP261 Notice received and permanently filed in corporate book.
2. Reasonable Compensation Defensibility
Industry Benchmark: RCReports or BLS wage data pulled for officer role and geography.
60/40 Split Rule: Ratio between W-2 salary and distributions reviewed by CPA.
Time Log: Documented officer administrative hours vs revenue-generating tasks.
Salary Before Distribution: W-2 salary paid on schedule before taking owner draws.
3. Payroll Setup & Quarterly Withholding
Automated Payroll: Gusto or ADP connected with EIN for auto FICA tax deductions.
Form 941: Quarterly federal payroll tax returns filed and paid on time.
Form 940 (FUTA): Federal unemployment tax calculated and paid annually.
State UI & SUI: State unemployment and withholding accounts registered and active.
4. Tax Deductions & Fringe Benefits
Health Insurance: 2% shareholder health premiums included in W-2 Box 1 (exempt from FICA).
Accountable Plan: Formal written expense reimbursement policy enacted for home office/mileage.
Solo 401(k): Up to $69,000 employer profit-sharing + employee deferrals maxed out.
Form 1120-S: Annual S-Corporation tax return and Schedule K-1s delivered to owners.
Generated by BusinessYield.tools • Small Business Tax & Wealth Preservation Suite.
S-Corp Protocol 2026
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