Late S corp election: How to file it after the deadline
Small business owners often choose an S corporation tax status due to its pass-through taxation advantages. To elect this tax classification, you must file the Internal Revenue Service (IRS) Form 2553, Election by a Small Business Corporation, in a timely manner. However, if certain circumstances arise, you may need to file a late S corporation election.
This guide will detail the process for submitting a delayed S corp election to the IRS and the criteria you must fulfill.
Electing S corporation status
If your business is an LLC or a corporation and wants to file taxes as an S corporation, it can acquire an S corporation tax status with the IRS Form 2553.
The process is complex and has limitations on shareholders, owners, and classes of stock. If you have doubts about an S corp tax status, schedule a phone consultation with a TFX tax professional to ensure it’s the right choice for your business.
The deadline for submitting Form 2553 depends on whether you are a new or existing business.
New businesses
The Form 2553 must be filed within two months and 15 days from the date you formed your company. For example, if your business was formed on October 31, 2024, the S corp election deadline 2024 would be January 14, 2025.
Existing businesses
For existing businesses, the S corp election deadline is two months and 15 days from the start of the tax year. For most American taxpayers, including businesses, the tax year begins on January 1. Therefore, you need to file Form 2553 by March 15, 2024, for the S corp election to be effective for the entire 2024 tax year.
If you miss the deadline, you won't get an S corp tax status unless you qualify for late S corp election tax relief.
What is a late S corp election relief?
S corp late election relief is a revenue procedure (Rev. Proc. 2013-30) under which you can file a late S corp election directly with the IRS Service Center.
To qualify for an S corporation status and receive retroactive tax treatment, your business must meet these requirements:
- Have a reasonable clause for filing late.
- Meet general requirements to be an S corporation.
- Meet the late filing timeframe: Your late S corp election must be filed within three years and 75 days after its proposed effective date.
- Operate in a way that aligns with your desire to be classified as an S corporation for taxes. This includes reporting income on all your business tax returns as if the election were in effect.
For example, if today is February 25, 2024, you are making a timely election – you have till March 15, 2024, to file the IRS Form 2553. However, if it’s currently July 21, 2024, and you want your business to be taxed as an S corporation for the current (2024) tax year, you’ll need to file a late S corp election.
If you do not meet eligibility requirements for relief for a late S corp election, you might have to request a private letter ruling and pay a user fee.
How to file a late S corp election?
You can file a late S corporation election by completing the IRS Form 2553. The form has five pages and four parts. Read this guide Form 2553: How to elect an S corp tax status for detailed Form 2553 instructions.
If you file a late S corp election, you should pay special attention to section I of Part I of this form. There, the IRS requires you to explain "the reasons the election or elections were not made on time." They also ask you to write "a description of diligent actions to correct the mistake upon its discovery."
Below is an example statement of S corp election late filing reasonable cause for Section I of Form 2553:
"The taxpayer, operating as a multi-member LLC, did not realize that a separate election was necessary to classify the LLC as an S corporation for federal tax purposes. With the intention of adopting S corporation status from January 1, 2024, the LLC filed its tax return for the 2024 tax year as an S corporation, reporting shareholder distributions and income allocations in line with S corp tax treatment. On June 13, 2024, the taxpayer identified the missed filing and promptly sought guidance from a tax advisor to rectify the situation by submitting Form 2553 with a late election request. Moving forward, the LLC has established a tracking system to oversee all critical tax filing deadlines.”
In addition, you should refer to representations from Part IV on the last page of Form 2553 and include them in the statement you make above in Part I.
When submitting Form 2553 for a delayed S corporation selection, you must inscribe "FILED PURSUANT TO REV. PROC. 2013-30" in the upper margin of the form's initial page. If you are filing your tax return on Form 1120-S and submitting Form 2553 at the same time, you must enter in the top margin of the first page of Form 1120-S "INCLUDES LATE ELECTION(S) FILED PURSUANT TO REV. PROC. 2013-30."
You can fax this form or send it by mail to the designated IRS Service Center.
Accepting your S corporation tax status may take up to three months. After accepting the election, the IRS must send you an S corp acceptance letter, which will include the effective date. If the IRS rejects your S corporation election, you’ll receive Notice CP264 with an explanation of why it was rejected.
For a late S corporation election, it’s wise to consult a tax advisor first. At TFX, our expert CPAs and EAs will walk you through the entire S corp election process, explain the benefits and potential downsides of S corporation tax status, and file your tax documents with the IRS.
FAQ
Form 2553, "Election by a Small Business Corporation," is used by LLCs or corporations to elect S corporation tax status with the Internal Revenue Service (IRS).
You can make an S corp election within two months and 15 days of the start of your business or the beginning of the tax year. If you miss this window, you can file for late election relief if you qualify.
Yes, you can file a late election for S corporation status by submitting Form 2553 and including a statement with a reasonable clause explaining the delay.
You can file a late S corp election up to three years and 75 days after the intended effective date.
A reasonable clause for not filing Form 2553 timely could include unawareness of the requirement or a clerical oversight, provided corrective actions were taken immediately upon discovery of the mistake.
No, you need to submit it by fax or mail to the appropriate IRS Service Center based on your business location.
Fax Form 2553 to the IRS Service Center which varies based on your business’s location. Always check for the latest fax numbers on the IRS website to ensure accuracy.
Mail Form 2553 to the IRS Service Center designated for your location. Check the IRS instructions for Form 2553 to confirm the correct mailing address as it varies by region.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Always consult with a tax professional regarding your specific case.
Susan Turcotte, a seasoned CPA with over 45 years of accounting experience, holds a Bachelor's in Accounting and a Master's in Taxation from Bryant College. See more
Further reading
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