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Is Your Company Eligible For S Corporation Late Election Relief?

Many new businesses and existing C Corporations elect to be treated as an S Corporation for the tax benefits. In some instances, companies fail to meet the filing deadline, which is 75 days after incorporating or 2 months and 15 days after the beginning of the tax year. If your business failed to meet this deadline, you may still qualify for S Corporation late election relief.

Electing to be taxed as an S Corp
The IRS sends a CP261 Notice to businesses to confirm acceptance of the S Corporation election; that is protocol. If the business doesn’t know if they received the letter or not, they should contact the IRS directly at their Business and Specialty Tax Line at (800) 829-4933 (M-F, 7am-7pm).

How to qualify for S Corporation late election relief
If your company did not file the Form 2553 on time, but still meets the late election relief criteria in IRC Section 1362(b)(5) detailed below, the next steps should be to file the IRS Form 2553. When filing the form, write at the top of the form the following words: “FILED PURSUANT TO REV. PROC. 2013-30.” Furthermore, if you make the election with your first tax return, write in the top margin of the first page of Form 1120S “INCLUDES LATE ELECTION(S) FILED PURSUANT TO REV. PROC. 2013-30.

The Corp. meets the S-Corp. eligibility criteria:
1) The corporation intended to be classified as an S corporation as of the date entered on line E of Form 2553;
2) The corporation fails to qualify as an S corporation on the effective date entered on line E of Form 2553 solely because Form 2553 was not filed by the due date
3) The corporation has reasonable cause for its failure to timely file Form 2553 and has acted diligently to correct the mistake upon discovery of its failure to timely file Form 2553
4) Form 2553 will be filed within 3 years and 75 days of the date entered on line E of Form 2553

Please note that to request late election relief when the above requirements are not met, the corporation generally must request a private letter ruling and pay a user fee in accordance with Rev. Proc. 2014-1, 2014-1 I.R.B. 1.

More Questions? Browse Answers or ask your s corporation tax filing questions online.

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