Late S-Corp elections are not uncommon. Many companies missed the deadline to file with the IRS for this election, which offered certain tax benefits. If you’re wondering how to submit a late S-Corp election, there’s no need to panic.
What is an S Corporation?
If your business is currently established but has not submitted an S-Corp election, it is considered a C-Corp. In contrast, S-Corporation offers some unique benefits. Eligible companies can apply for this status, which will facilitate corporate tax filings. If you are considering S-Corp elections, please note that in S-Corp:
- Only individuals, other trustees and estates may have shares.
- The company must be domestic and have only one class of stock.
- Once a business becomes an S-Corp, it will be referred to as a “pass-through” tax entity. Income, deductions, credits and losses can then be passed on to the owner instead of being taxed at the corporate level. This applies to federal and most state tax requirements.
When you file for an S-Corp election, this means you are filing a tax election with the IRS. By placing the business under new tax rules, as described in Subchapter S, it will be taxed differently than C-Corp. As long as a company meets all requirements and submits an election on time, it is considered an S-Corp. So how do you handle a late S-Corp election if you miss the deadline?
How to Submit a Late S-Corp Election
If you miss the deadline, you will need to download Form 2553. It can be filled out on your computer or printed and filled out by hand. In this form, all relevant information is requested. This helps the IRS determine if your business is eligible. Even if you file a Late Election for S Corp, the most important information will be the date of incorporation and the fiscal year of your company. This form needs to be signed by an officer and all relevant shareholders. Next, submit Form 2553 to your company’s IRS service center to this end:
- Attach Form 2553 to your current year’s Form 1120S, as long as the form is filed within three years and 75 days of the scheduled date of the S-Corp election.
- Attach the late Form 1120S, which will be subject to the same time limit (three years and 75 days from the expected S-Corp election date).
- Submit directly to the IRS Service Center.
If you want to file an election application in time to allow your business to file as an S-Corp for the current tax year, you must:
- Submit Form 2553 S Corp Election within two months and 15 days of the start of your fiscal year.
- If newly incorporated, submit within 2 months and 15 days of incorporation.
- Request relief when filing a late S-Corp election. Failure to qualify will only be based on S-elections submitted after the deadline. To do so, complete the narrative section of Form 2553 at the bottom of page 1.
- When you apply for relief to the IRS, you must write this on your late election form: “Submitted under REV. To better understand what is required, please refer to this IRS document.
- Your business will not be eligible to file an S-Corp tax return until you get approval from the IRS.
What are legitimate reasons for a delay in an S-Corp application?
You’ll be happy to know that the IRS can be pretty lenient when it comes to granting relief. Some good reason is almost always approved after reviewing court documents and tax logs. These reasons vary, but the two most common include:
- Company presidents, executive officers, or people in similar positions fail to file documents on time. In some cases, this could also be a company accountant who failed to submit an S-Corp election.
- The company or shareholders didn’t know that early filing was required — or that they didn’t need to file at all.
- If you need help filing a late S-Corp election, you can post your legal needs on UpCounsel’s marketplace. UpCounsel only accepts access to its website from the top 5% of lawyers. UpCounsel attorneys hail from law schools including Harvard Law School and Yale Law School and have an average of 14 years of legal experience.