A C Corporation or an LLC can elect to be taxed as an S Corporation by filing Form 2553. The filing date for the form is within needs to be within 75 days of forming your business entity.
If you missed the date, don’t panic. You actually have a very easy way to make a late election, as long as it is within 3 years and 75 days of the formation. You need to file a little differently and have a reasonable cause for not filing on time.
We’re going to walk through all of that now, because it’s an important question.
For late elections, complete the Form 2553 with a couple of distinctions:
#1: The Form 2553 must have “FILED PURSUANT TO REV PROC 2013-30” written across the top of the front page.
#2: You must also include a good reason for why it’s late. Some excuses that work:
The attorney thought the CPA was doing it and the CPA thought the attorney was doing it.
The taxpayer thought the CPA was going to file it.
The taxpayer didn’t know it needed to file an S election.
But the best is: The information necessary to make an informed decision about the entity’s tax status was not available in time to file a timely election.
Now, let’s talk about how you send this to the IRS.
You then mail in Form 2553 independently of Form 1120s.
If you’re filing your Form 1120S right away, I’d recommend that you attach the Form 2553 to the S Corp’s first. On the first page of the Form 1120-S at the top write “INCLUDES LATE ELECTION FILED PURSUANT TO REV PROC 2013-30”
Recently, a tax preparer in one of my professional groups had a late S Corp election denied. I’d never seen that before, so I was curious to see what was filed.
There were two mistakes:
#1: The “Filed pursuant to Rev Proc 2013-30” was written elsewhere on the form. It needs to be on top, right across the top of the first page.
#2: The reason why the election is late was not included.
I’ve been doing this for years and never had one denied. The key is just to follow the guidelines.