S Corporation Election
A corporation must file a Form 2553 with the IRS to elect to be an S Corp.
The form must be completed and filed (a) at any time before the 16th day of the 3rd month of the tax year, if filed during the tax year the election is to take effect, or (b) at any time during the preceding tax year. An election made after that time but before the end of the tax year will be effective the next tax year.
The corporation can request a private letter ruling and pay a user fee in accordance with Rev. Proc. 2005-1 (or its successor) when filing after the due date if it can show that the failure to file on time was due to reasonable cause.
Initial Return Exception: If the election is filed within 12 months of its due date and the original due date for filing the corporation’s initial Form 1120S has not passed, the ruling and user fee requirements do not apply. To request relief in this case, write “FILED PURSUANT TO REV. PROC. 2003-43” at the top of page 1 of Form 2553, attach a statement explaining the reason for failing to file the election on time, and file Form 2553 as otherwise instructed.
Upon receipt of a completed application requesting relief under Rev. Proc. 2003-43 (attached), the IRS will determine whether the requirements for granting an additional time to file an S Corp election have been satisfied and will notify the corporation of the result of this determination.
The S Corp election, once granted, will be in effect until it is terminated. Once terminated, the corporation (or its successor) cannot be reinstated as an S Corp before the 5th tax year after the first tax year in which the termination took effect without IRS consent.
Rev. Proc. 2003-1 provides a special procedure to request relief for a late S Corp election. It applies only to a corporation (1) that has not filed a timely S Corp election, (2) for which an S Corp election is filed within 6 months of the original due date for the election, and (3) for which the due date of the tax return (excluding extensions) for the first year the corporation intended to be an S Corp has not passed.
This article was written by Nancy K. Phillips, CFP®, CPA and/or her staff. It is intended to provide you with an informative summary of current business, financial and/or tax planning news. Do not apply this general information to your specific situation without additional details and/or professional assistance.
The form must be completed and filed (a) at any time before the 16th day of the 3rd month of the tax year, if filed during the tax year the election is to take effect, or (b) at any time during the preceding tax year. An election made after that time but before the end of the tax year will be effective the next tax year.
The corporation can request a private letter ruling and pay a user fee in accordance with Rev. Proc. 2005-1 (or its successor) when filing after the due date if it can show that the failure to file on time was due to reasonable cause.
Initial Return Exception: If the election is filed within 12 months of its due date and the original due date for filing the corporation’s initial Form 1120S has not passed, the ruling and user fee requirements do not apply. To request relief in this case, write “FILED PURSUANT TO REV. PROC. 2003-43” at the top of page 1 of Form 2553, attach a statement explaining the reason for failing to file the election on time, and file Form 2553 as otherwise instructed.
Upon receipt of a completed application requesting relief under Rev. Proc. 2003-43 (attached), the IRS will determine whether the requirements for granting an additional time to file an S Corp election have been satisfied and will notify the corporation of the result of this determination.
The S Corp election, once granted, will be in effect until it is terminated. Once terminated, the corporation (or its successor) cannot be reinstated as an S Corp before the 5th tax year after the first tax year in which the termination took effect without IRS consent.
Rev. Proc. 2003-1 provides a special procedure to request relief for a late S Corp election. It applies only to a corporation (1) that has not filed a timely S Corp election, (2) for which an S Corp election is filed within 6 months of the original due date for the election, and (3) for which the due date of the tax return (excluding extensions) for the first year the corporation intended to be an S Corp has not passed.
This article was written by Nancy K. Phillips, CFP®, CPA and/or her staff. It is intended to provide you with an informative summary of current business, financial and/or tax planning news. Do not apply this general information to your specific situation without additional details and/or professional assistance.