S-Corp LLC Help

[HoraceGrant]

Hey @isufbcurt , is this legit or a scam? I’ve never gotten anything like this in previous years and then all of a sudden they want me to confirm my identity.

View attachment 128879

I believe that is legit. I assume the notice number is 5071c. You can read about it below.

Understanding your CP5071 series notice | Internal Revenue Service

You got a CP5071, 5071C or CP5071F because a tax return was filed under your Social Security number (SSN) or individual tax identification number (ITIN). Verify your return to prevent identity theft.

www.irs.gov

 

[isufbcurt]

Hey @isufbcurt , is this legit or a scam? I’ve never gotten anything like this in previous years and then all of a sudden they want me to confirm my identity.

View attachment 128879

Yes it is legit. I had a couple clients get them and ask me the same thing.

Both of my clients that received that letter received pretty large Federal refunds so I figured they are just making sure they actually filed the tax return and didn't have their information stolen to file a tax return to get a large refund.

 

[HoraceGrant]

Generally, I wouldn't advise using the QR code if you get a letter for something like that just in case it was fraudulent. Go directly to the IRS website and navigate from there. In this case its likely safe because the IRS does use them, but just as a general practice.

 

[Clark]

This can be true in some instances, but, in general, distributions from an S corp are tax free.

This is what I am curious about. I have never heard of anything like that in my time working in the industry, but like I said before people love to give bad advice about legal entities and their impact on taxes.

It was worded poorly but what I assume he is referring to was the income reported on the k-1.

Someone correct me if I'm wrong but the way I've typically seen stock options work for an employee is the option is treated as w-2 income which creates a cost basis in the stock option. Then when the employee sells the stock, they have a capital gain for the difference in the amount the stock sold on the market vs what the amount the stock option was for.

In that scenario I fail to see what the point of an llc or scorp would be.

Let's assume I'm missing something here though and the purpose is to avoid some self employment tax. There's a catch with S-corps, and it is you can't take all the money out as distributions. Some of it would need to be wages.

 

[Clark]

Generally, I wouldn't advise using the QR code if you get a letter for something like that just in case it was fraudulent. Go directly to the IRS website and navigate from there. In this case its likely safe because the IRS does use them, but just as a general practice.

absolutely agree. The website they listed in the letter is legit, doesn't mean that is where the barcode takes you.

 

[HoraceGrant]

It was worded poorly but what I assume he is referring to was the income reported on the k-1.

Someone correct me if I'm wrong but the way I've typically seen stock options work for an employee is the option is treated as w-2 income which creates a cost basis in the stock option. Then when the employee sells the stock, they have a capital gain for the difference in the amount the stock sold on the market vs what the amount the stock option was for.

In that scenario I fail to see what the point of an llc or scorp would be.

Let's assume I'm missing something here though and the purpose is to avoid some self employment tax. There's a catch with S-corps, and it is you can't take all the money out as distributions. Some of it would need to be wages.

I end up researching stock options every single year because there are several ways they can be done and I always need a refresher, but how you described is how I have seen it done in most cases. Its compensation just like normal wages, but in the form of stock rather than cash. If he is now a partner and receiving a K-1 then that would make a little more sense given the original question, but hard to say without knowing more.

 

[mynameisjonas]

I believe that is legit. I assume the notice number is 5071c. You can read about it below.

Understanding your CP5071 series notice | Internal Revenue Service

You got a CP5071, 5071C or CP5071F because a tax return was filed under your Social Security number (SSN) or individual tax identification number (ITIN). Verify your return to prevent identity theft.

www.irs.gov

Yes 5071C

 

[TXCyclones]

Because a couple people have asked for further background here is the entire text of the email I received.

“[TXCyclones] - ahead of your start we are preparing incentive unit grants

“Do you have an S-Corp LLC established?

“If not, it would be best to take those steps ahead of your start date to facilitate the grant process.”

This is from the CFO of the private equity firm that owns the company with whom I am taking a new job.

 

[Mr.G.Spot]

I would ask the CFO and the PE firm why they are asking this question. Once you understand their reasoning then u have info to discuss with your CPA or lawyer. Quick note - LLC'S, Corps with S status, partnerships cost money to set and will have increased annual tax prep fees.

 

[boone7247]

Because a couple people have asked for further background here is the entire text of the email I received.

“[TXCyclones] - ahead of your start we are preparing incentive unit grants

“Do you have an S-Corp LLC established?

“If not, it would be best to take those steps ahead of your start date to facilitate the grant process.”

This is from the CFO of the private equity firm that owns the company with whom I am taking a new job.

I haven’t seen anything like that. That said be sure you are getting hired as an employee not a contractor.

If an employee would be curious how this works.

Wondering if the incentive will qualify for 83b treatment.

Contractor will really change your compensation. But makes way more sense why they are asking this question.