Key Takeaways

  • The s election deadline is generally 2 months and 15 days after the beginning of the tax year.
  • Missing the deadline doesn't automatically disqualify a business; IRS relief may be available under Rev. Proc. 2013-30.
  • Form 2553 must be correctly completed, signed by all shareholders, and submitted on time.
  • Corporations formed late in the year can select a tax year starting January 1 for better flexibility.
  • Sole proprietors or LLCs switching to S corp status must align election timing with entity formation or tax classification changes.
  • Late elections must demonstrate reasonable cause and be filed within 3 years and 75 days of the intended effective date.

Forming an S Corporation

For many business owners, an S corporation is a better option than a C corporation for taxation and other aspects of running the company. In order to elect for treatment as an S corporation, you must file IRS Form 2553, which is titled Election by a Small Business Corporation. When a corporation is formed, it starts as a for-profit, general C corporation. Before a business reaches that status, the owner(s) must incorporate by following the steps required in the state in which it will do business.

After a business has incorporated, the owners must verify that it meets the criteria to be eligible to operate as an S corporation.

Eligibility criteria to become an S corporation includes:

  • One class of stock, allowing all owners to share the losses and profits equally, based on the percentage of ownership in the business.
  • No more than 100 shareholders.
  • All shareholders are individuals, not partnerships or LLCs.
  • All shareholders are legal residents of the U.S.

Upon determining that a corporation is eligible to operate as an S corporation, the owners must then complete Form 2553 and file it with the IRS. The IRS will provide notification to state whether the election has been accepted within 60 days of filing Form 2553.

The S corporation election deadline is the 16th day of the third month of the tax year of the corporation. If the tax year is 2.5 months or less, the deadline is prior to the 15th day of the second month of that tax year.

When Is the S Election Deadline?

The deadline to file an S election is two months and fifteen days after the beginning of the tax year the election is to take effect. For most corporations on a calendar tax year, this means filing Form 2553 by March 15. Missing this s election deadline can result in the business being taxed as a C corporation for that year.

However, the IRS does allow certain late elections under specific conditions (see below). The key is to determine the corporation’s tax year and calculate the deadline accordingly.

For example:

  • If the tax year starts on January 1, the deadline is March 15.
  • If the tax year begins on April 1, the deadline would be June 15.

Entities with a short tax year due to mid-year formation or reclassification need to calculate accordingly and may have different timelines.

Procedures for Late Elections for S Corporation Status

If you fail to file Form 2553 before the deadline has expired, you do have another option. You must request approval from the IRS to retroactively approve the S corporation election, dated to the start of the tax year of the corporation.

If a corporation has filed Form 2553 before the 15th day of the third month of the next tax year, but after the 15th day of the third month of the current tax year, the IRS will typically allow that corporation to elect for taxation as an S corporation for the following tax year only. In order to elect for the current tax year, the corporation must be eligible for a late election.

Generally, the IRS does offer some flexibility in the deadline for a corporation, but the owners must provide reasonable cause for going past the deadline. Additionally, the IRS only permits late filing if the corporation failed to file the form on time, not if the corporation had any other reason for not electing S corporation taxation. When requesting approval for a late filing, you will need to include a statement with Form 2553 that indicates that the corporation failed to file the form on time, or that details the reasonable cause for failing to file on time.

IRS Relief for Late S Elections

If a corporation misses the s election deadline, the IRS offers relief under Revenue Procedure 2013-30. This relief allows late elections to be granted automatically if:

  • The corporation intended to be an S corporation as of a specific date,
  • It has reasonable cause for missing the deadline,
  • It acted promptly to correct the oversight, and
  • It has not already filed a tax return inconsistent with S corporation status.

To qualify, the business must:

  • File Form 2553 within 3 years and 75 days after the intended effective date, and
  • Include a statement explaining the reasonable cause for the late election.

Examples of reasonable cause might include:

  • Miscommunication with a tax professional,
  • Clerical errors,
  • Ignorance of the filing deadline despite reasonable efforts to comply.

Reasonable Cause

In order to file late, a corporation may have to show that it had reasonable cause for the delayed filing. This term relates to the specific circumstances or facts that led to the forms being filed past the deadline.

According to the IRS, reasonable cause relates to each individual situation. The IRS will consider any reason that shows the corporation was using prudence and care to meet its obligations but was unable to do so. If the conduct of any taxpayer justifies the abatement or non-assertion of a penalty, that taxpayer would have reasonable cause. All cases are individually judged, based on what information is provided.

Choosing a Tax Year and Impact on the Deadline

While most S corporations follow a calendar year, some may select a fiscal year. Choosing a non-calendar year requires justification (e.g., natural business year) and IRS approval via Form 1128.

Importantly, the s election deadline is always based on the start of the selected tax year, not the date the business was incorporated. Therefore, late-year formations (e.g., December incorporations) may elect a tax year beginning January 1 of the following year for better timing.

When to Submit Form 2553

The owners of a new corporation must file Form 2553 within 75 days of the date the business was incorporated.

Common Mistakes to Avoid When Filing Form 2553

Many late S election rejections stem from basic filing errors. Here are key mistakes to avoid:

  • Incorrect or incomplete Form 2553 – Ensure all fields are completed, including EIN, shareholder names, and ownership percentages.
  • Missing shareholder signatures – All shareholders must sign Form 2553.
  • Wrong tax year indicated – The “effective date” must align with the start of the intended tax year.
  • Sending the form to the wrong IRS address – Submission address depends on the corporation’s location.

To minimize risk, keep copies of all submissions and confirm IRS receipt if possible.

Why Should I Form an S Corporation?

One of the main benefits of electing for treatment as an S corporation is avoiding double taxation. All taxable income of an S corporation is passed on to the shareholders. The shareholders then must report that income on their personal tax returns. All net income of an S corporation is only taxed on the personal level of the shareholders.

S Election Deadline for LLCs Electing S Corp Status

LLCs that elect to be taxed as S corporations face additional timing considerations. If an LLC is:

  • A single-member LLC (disregarded entity) or
  • A multi-member LLC (default partnership),

…it must first elect to be taxed as a corporation by filing Form 8832, then submit Form 2553 to elect S corporation status.

Both forms can be filed together if properly completed. However, the s election deadline still applies to the intended S corporation effective date, so plan accordingly.

Frequently Asked Questions

  1. What is the S election deadline for a new corporation?
    Generally, it’s 2 months and 15 days after the start of the corporation’s first tax year (e.g., March 15 for calendar year businesses).
  2. Can I still elect S corp status if I missed the deadline?
    Yes, if you qualify for late election relief under IRS Revenue Procedure 2013-30 and file within 3 years and 75 days of the intended effective date.
  3. Do all shareholders need to sign Form 2553?
    Yes, all shareholders must consent by signing the form for the election to be valid.
  4. What happens if Form 2553 is filed late without reasonable cause?
    The election will be rejected, and the business will be taxed as a C corporation for that tax year.
  5. Does an LLC have a different S election deadline?
    No, the deadline is the same, but LLCs must also consider their initial tax classification and possibly file Form 8832 first.

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