Late S Corp Election: Everything You Need to Know
A late S-Corp election is not unusual. Many corporations miss the deadline to file this election, which provides certain tax benefits, with the IRS. 3 min read
Updated June 24, 2020:
A late S-Corp election is not unusual. Many corporations miss the deadline to file this election, which provides certain tax benefits, with the IRS. If you are wondering how to file a late S-Corp election, there is no need to panic. Everything you need to know is included in this mini guide.
What Is an S-Corp?
If your business is currently incorporated but has not yet filed an S-Corp election, it is what's considered a C-Corp. In comparison, an S-Corporation offers some unique benefits. Eligible corporations can file for this status, which will benefit corporate tax returns. If you are considering S-Corp election, be mindful that in an S-Corp:
- Only individuals, specific trusts, and estates can own shares.
- The corporation must be domestic with only one class of stock. It may also have no more than 100 shareholders.
Once a business becomes an S-Corp, it will be referred to as a "pass-through" taxation entity. Income, deductions, credits, and losses can then be passed on to the owners, instead of being taxed at the corporate level. This applies for federal and most state-level tax requirements.
When filing for S-Corp election, this means that you make a tax election with the IRS. By placing the business under new tax provisions, as outlined in Subchapter S, it will be taxed differently than a C-Corp. As long as a corporation meets all the requirements and the election is filed on time, it will be treated as an S-Corp. So, how do you address a late S-Corp election if you missed the deadline?
How to File a Late S-Corp Election
If you have missed the deadline, you will need to download Form 2553. It can either be filled out on your computer or printed and completed by hand. On this form, all of the relevant information is requested. This helps the IRS determine whether or not your corporation is eligible. Even if you file a late S-Corp election, the most important information will be the date of incorporation and your corporation's fiscal year.
This form will need to be signed by an officer, as well as all associated shareholders.
Next, file Form 2553 with your corporation's IRS Service Center. To do so:
- Attach Form 2553 to your current year Form 1120S, as long as the form is filed within three years and 75 days after the intended date of S-Corp election.
- Attach to a late-filed Form 1120S, which will be under the same time restrictions (three years and 75 days of intended S-Corp election date).
- Submit directly to the IRS Service Center.
If you would like to file for election in a timely manner, allowing your corporation to file taxes as an S-Corp for its current tax year, you must:
- File Form 2553 within two months and 15 days of the beginning of your fiscal year.
- File within 2 months and 15 days of incorporation, if it is newly formed.
- Request relief when filing a late S-Corp election. Failure to qualify will be solely based on an S-election that is filed past the due date. To do so, fill out the narrative section of Form 2553, found on the bottom of Page 1.
When you request relief from the IRS, you must state on the late-election form: "FILED PURSUANT TO REV. PROC. 2013-30." Write this on the top of the form. To better understand what is required, refer to this IRS document.
Until you receive approval from the IRS, your corporation will not be eligible to file an S-Corp tax return.
What Is a Reasonable Cause of Late S-Corp Filing?
You will be happy to know that when granting relief, the IRS can be fairly lenient. Upon reviewing court documents and tax journals, certain reasonable causes are nearly always approved. These causes vary, but two of the most common include:
- The company's president, executive officer, or someone in a similar position, neglected to file on time. In some cases, this may also be the corporation's accountant who failed to file an S-Corp election.
- The corporation or the shareholders did not know that advanced filing was required — or that they needed to file at all.
If you need help filing a late S-Corp election, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.