Late S Corp Election: How to Fix a Missed Form 2553 Deadline
Did you mean to be an S corp, but the form never got filed?
It happens more than you'd think. You formed the LLC, maybe started payroll, and assumed the S corp part was handled. Then the IRS rejects your S corp return, or a new tax preparer asks for your acceptance letter and there isn't one.
The good news: the IRS has a fix for most of these cases. Here's how it works.
How a Missed Election Happens
A few common ways:
Nobody filed it. You or your formation service thought someone else was sending Form 2553.
It got lost. It was mailed or faxed, but the IRS has no record of it, and nobody followed up.
It was filed too late. Form 2553 is due 2 months and 15 days after the start of the year you want it to cover. For most businesses, that's March 15.
A signature was missing. Every owner has to sign. An election missing one can be treated as never made.
What Happens If You Don't Fix It
Without the election, the IRS treats your business as if it never became an S corp. A late form filed without relief generally only takes effect the following year.
That can mean:
Your S corp return gets rejected, because the IRS has no S election on file.
Self-employment tax on all your profit for the years you thought you were an S corp. Self-employment tax is the Social Security and Medicare tax you pay on your own profit.
Messy amended returns for you and any other owners.
The longer it sits, the more years it touches. So fix it as soon as you find it.
The Fix: Late Election Relief
The IRS's rule for this is called Rev. Proc. 2013-30. Under it, you can ask for your election to count as if it was filed on time. You qualify if all of these are true:
You meant to be an S corp as of the date you're asking for.
The only problem is timing. Your business met every other S corp rule. It just didn't file Form 2553 by the deadline.
You had reasonable cause for filing late, and you fixed it quickly once you found out.
You're within 3 years and 75 days of the date you wanted the election to start.
Every owner during that period also has to confirm they reported their income as if the business was an S corp. Signing the consent on page 2 of Form 2553 covers this.
What Counts as Reasonable Cause?
The IRS doesn't give a checklist. What it wants is a true, specific explanation of why the form wasn't filed on time, and what you did once you found out.
A strong explanation:
Says what happened, in plain words, with dates.
Says when you found out, and how.
Shows you acted fast once you knew.
Keep it honest and short. Don't stretch the story. The explanation is signed under penalties of perjury.
How to File a Late Election
Fill out Form 2553 like a normal election. Use the date you wanted the S corp to start as the effective date.
Write "FILED PURSUANT TO REV. PROC. 2013-30" in the top margin of the first page.
Explain your reasonable cause on line I, or on a statement you attach.
Get every owner's signature on page 2. That includes anyone who owned part of the business from the effective date until today.
Send it in. You can file it on its own by mail or fax. California businesses use the IRS center in Ogden, Utah (fax 855-214-7520). Or attach it to your S corp return, Form 1120-S, if all your earlier S corp returns have been filed.
If you attach it to Form 1120-S, also write "INCLUDES LATE ELECTION(S) FILED PURSUANT TO REV. PROC. 2013-30" in the top margin of that return's first page.
Then watch for the IRS's answer. If nothing arrives within about 2 months, call the IRS at 1-800-829-4933 to check on it.
What If It's Been More Than 3 Years and 75 Days?
There's a narrow exception for corporations that have filed S corp returns all along without hearing a problem from the IRS. In practice, few businesses qualify. When an S corp return comes in with no election on file, the IRS usually flags it.
If you don't qualify, the remaining option is asking the IRS for a private letter ruling. That's a formal request that comes with an IRS fee and more paperwork. It's worth avoiding, which is one more reason to fix a missed election as soon as you find it.
LLCs: One Form Covers Both Elections
An LLC that wants S corp status normally needs to be treated as a corporation first. If your LLC missed that step too, Form 2553 can fix both at once. The LLC has to meet a few extra conditions, which are listed in Part IV of the form, including having filed all its returns as an S corp.
Key Takeaway: A missed S corp election can usually be fixed if you file within 3 years and 75 days, show reasonable cause, and have every owner sign. Write "FILED PURSUANT TO REV. PROC. 2013-30" at the top of Form 2553, explain what happened, and file it now. Every month you wait adds to the cleanup.
Not sure whether an S corp makes sense in the first place? Start with S Corp Election for Contractors: How to File Form 2553 by March 15, or run your numbers in the S Corp Tax Savings Calculator.
At Civita Tax Solutions, we help home service business owners save money on taxes with all-in-one accounting. We handle your bookkeeping, advisory, and tax filing. You focus on the business. We handle the finances.
Think your election may have slipped through the cracks? Book a free consultation. We'll help you figure out where you stand and file the late election for you.
