USA FORM 2553

[mparacha]

Hello,

I have a client who has operated as Single Member LLC. Can we make an election entity election together with the S Corp election by completing and attaching Form 2553 to the return? No extension filed. It seems that Revenue Procedure

This is from the IRS website. Procedure 2013-30

Relief for Late Elections
The following two sections discuss relief for late S corporation elections and relief for late S corporation and entity classification elections for the same entity. For supplemental procedural requirements when seeking relief for multiple late elections, see Rev. Proc. 2013-30, section 4.04.

When filing Form 2553 for a late S corporation election, the corporation (entity) must enter in the top margin of the first page of Form 2553 "FILED PURSUANT TO REV. PROC. 2013-30." Also, if the late election is made by attaching Form 2553 to Form 1120-S, the corporation (entity) 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."

The election can be filed with the current Form 1120-S if all earlier Forms 1120-S have been filed. The election can be attached to the first Form 1120-S for the year including the effective date if filed simultaneously with any other delinquent Forms 1120-S. Form 2553 can also be filed separately.


Relief for a Late S Corporation Election Filed by a Corporation
A late election to be an S corporation generally is effective for the tax year following the tax year beginning on the date entered on line E of Form 2553. However, relief for a late election may be available if the corporation can show that the failure to file on time was due to reasonable cause.
To request relief for a late election, a corporation that meets the following requirements must explain the reasonable cause for failure to timely file the election and its diligent actions to correct the mistake upon discovery. This information can be provided on line I of Form 2553 or on an attached statement.

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 (see Who May Elect, earlier) on the effective date entered on line E of Form 2553 solely because Form 2553 wasn’t filed by the due date (see When To Make the Election, earlier);
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; and
5. A corporation that meets requirements (1) through (4) must also be able to provide statements from all shareholders who were shareholders during the period between the date entered on line E of Form 2553 and the date the completed Form 2553 is filed stating that they have reported their income on all affected returns consistent with the S corporation election for the year the election should have been made and all subsequent years. Completion of Form 2553, Part I, column K, Shareholder's Consent Statement (or similar document attached to Form 2553), will meet this requirement; or
6. A corporation that meets requirements (1) through (3) but not requirement (4) can still request relief for a late election on Form 2553 if the following statements are true.
   1. The corporation and all its shareholders reported their income consistent with S corporation status for the year the S corporation election should have been made, and for every subsequent tax year (if any);
   2. At least 6 months have elapsed since the date on which the corporation filed its tax return for the first year the corporation intended to be an S corporation; and
   3. Neither the corporation nor any of its shareholders was notified by the IRS of any problem regarding the S corporation status within 6 months of the date on which the Form 1120-S for the first year was timely filed.

To request relief for a late election when the above requirements aren’t met, the corporation generally must request a private letter ruling and pay a user fee in accordance with Rev. Proc. 2021-1, 2021-1 I.R.B. 1 (or its successor).

Relief for a Late S Corporation Election Filed By an Entity Eligible To Elect To Be Treated as a Corporation
A late election to be an S corporation and a late entity classification election for the same entity may be available if the entity can show that the failure to file Form 2553 on time was due to reasonable cause. Relief must be requested within 3 years and 75 days of the effective date entered on line E of Form 2553.
To request relief for a late election, an entity that meets the following requirements must explain the reasonable cause for failure to timely file the election and its diligent actions to correct the mistake upon discovery. This information can be provided on line I of Form 2553 or on an attached statement.

1. The entity is an eligible entity as defined in Regulations section 301.7701-3(a) (see Purpose of Form in the Form 8832 instructions).
2. The entity intended to be classified as an S corporation as of the date entered on line E of Form 2553.
3. Form 2553 will be filed within 3 years and 75 days of the date entered on line E of Form 2553.
4. The entity failed to qualify as a corporation solely because Form 8832 wasn’t timely filed under Regulations section 301.7701-3(c)(1)(i) (see When To File in the Form 8832 instructions), or Form 8832 wasn’t deemed to have been filed under Regulations section 301.7701-3(c)(1)(v)(C) (see Who Must File in the Form 8832 instructions).
5. The entity fails to qualify as an S corporation (see Who May Elect, earlier) on the effective date entered on line E of Form 2553 because Form 2553 wasn’t filed by the due date (see When To Make the Election, earlier).
6. The entity either:
   1. Timely filed all Forms 1120-S consistent with its requested classification as an S corporation, or
   2. Didn’t file Form 1120-S because the due date for the first year's Form 1120-S hasn’t passed.
7. The entity 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.
8. The S corporation can provide statements from all shareholders who were shareholders during the period between the date entered on line E of Form 2553 and the date the completed Form 2553 is filed stating that they have reported their income on all affected returns consistent with the S corporation election for the year the election should have been made and all subsequent years. Completion of Form 2553, Part I, column K, Shareholder's Consent Statement (or similar document attached to Form 2553), will meet this requirement.

To request relief for a late election when the above requirements aren’t met, the entity generally must request a private letter ruling and pay a user fee in accordance with Rev. Proc. 2021-1 (or its successor).

 

[stevuke79]

Yes you can. We do it all the time. You must write some verbiage on the 2553 (and 8832 if you wish to make the entity election) demonstrating items 1-6 (1-8 for the 8832). They don't have to approve the election but we've never had one be denied.

But if you don't have an extension there will be a penalty and they better have taken payroll (or you can file a late payroll with penalties and interest.. I've done it before). Remember, .. you're basically saying they've been behaving like an s corp. That means extensions, payroll etc.

 

[mparacha]

Thank you so much. This was helpful.