Reference: Revenue Procedure 2013-30

The IRS just released updated and simplified procedures for late S corporation elections.  Over the last several years, we’ve seen an increase in corporations formed through paralegal services. Often times, the corporation feels that the paralegal has filed the S corporation election, Form 2553, with the IRS, but finds out a year later that nothing was mailed in.

Under this new Rev. Proc., in most circumstances, the IRS will allow a late filing election up to 3 years and 75 days from the original due date. The late filing does involve some detailed paperwork, but the process is straight-forward.  Please call us if you think that you need to make a late election. (Note: This new procedure supersedes all prior late filing procedures in this area).

Ref: Final Regulation Section 1.274-2

The IRS  just released final regulations dealing with reimbursed meals & entertainment in a business environment.  Here’s the changes in plain English:

Background: Most business meals and entertainment are only 50% deductible. However:

1. Employee submits to employer: When an employee submits meals to his/her employer, the reimbursement from the employer is not included in the employee’s income (if an accountable plan). The employee would then reduce his/her business meals/entertainment on Form 2106 by the full amount of the reimbursement.  Any amounts left over receive a 50% deduction on the employee’s return. Example: As an employee, you incur $4,000 in business meals with clients. You submit $3,500 to your employer for reimbursement, but forget to submit the other $500. Your meals deduction on your individual return would be $500 (and the IRS allows 50% = $250 as a deduction).

2. Independent contractor: IF the contract calls for the contractor to be reimbursed for meals and IF those meals are separately stated on the contractor invoice, then the contractor gets 100% deduction for the reimbursed meals.  The customer business would, therefore, get the 50% deduction.  Example: Software contractor is working away-from-home for 3 weeks and has $400 of meals which he can submit for reimbursement under the term of the contract. The customer pays him the $400 and includes it on the Form 1099. The contractor gets a deduction of $400 for the reimbursed meals. The customer’s deduction for that payment would be $400 * 50% = $200.

Please call or email with any questions and/or how to apply this final regulation to your business.