Missed the S corporation election deadline: can your firm still elect?

Often, yes. A late Form 2553 normally takes effect the following tax year, but Rev. Proc. 2013-30 lets a firm ask for the date it intended if it files within 3 years and 75 days of that date, shows reasonable cause, acted diligently once it found the mistake, and its shareholders reported income as if the election were in place. Outside those limits, the usual route is a private letter ruling, which carries a user fee.

A missed election is common when a firm forms a professional corporation or PLLC and everyone assumes someone else filed the form. Fixing it cleanly is part of Kathryn Meyer's work on tax planning for law firms, and the firm's own planning page notes that an election that is not done cleanly is where firms get into trouble.

What the deadline actually is

The Instructions for Form 2553 say the form must be filed no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year before. The 2-month period ends the day before the same-numbered day two months later, and the 15 days run from there. The instructions give two examples:

• A new corporation. A calendar-year corporation whose first tax year begins January 7 must file between January 7 and March 21. An election filed before its first tax year begins is not valid.
• An existing corporation. A calendar-year corporation that has been filing as a C corporation and wants S status from January 1 can file at any time during its last C corporation year, or by March 15 of the year it wants S status.

For a new entity, the start date is the earliest of the date it first had shareholders, first had assets, or began doing business. That is why "March 15" and "75 days after forming" are both only approximations: the exact date depends on when the first tax year began. An LLC or PLLC that is eligible to be taxed as a corporation can make the S election on Form 2553 without filing a separate Form 8832. If you are still deciding whether to elect at all, start with Tax-Smart Lawyering.

How to request late-election relief, step by step

1. Fix the intended effective date. This is the date you will enter on line E of Form 2553, and every deadline in Rev. Proc. 2013-30 runs from it.
2. Confirm the firm qualified on that date. Relief covers a firm that fails to be an S corporation solely because the form was late. It does not cure other problems, such as an ineligible shareholder or a second class of stock.
3. Check how the returns were filed. Relief depends on the corporation and its shareholders having reported income consistently with S status for each affected year.
4. Write the reasonable cause statement. Explain why the election was not filed on time and what you did once you found out. It goes on line I of Form 2553 or an attached statement, signed under penalties of perjury by an authorized officer.
5. Collect shareholder consents. Every person who was a shareholder between the effective date and the filing date must consent; signing column K of Form 2553 meets this requirement. If a spouse has a community interest in the shares, both spouses must consent.
6. Mark the form. Write "FILED PURSUANT TO REV. PROC. 2013-30" at the top of the first page.
7. File it. Attach it to the current Form 1120-S if all earlier ones are filed, attach it to the first Form 1120-S if the delinquent returns are filed together, or send it on its own to the IRS service center for your state by mail or fax.
8. Watch for the answer. The IRS says a determination should generally arrive within 60 days, and that if you hear nothing within 2 months of filing you should follow up.

Which route applies

Rev. Proc. 2013-30 says its procedures are in place of the letter ruling process, and that user fees do not apply to relief requested under it.

What about California?

California follows the federal election. Revenue and Taxation Code section 23801(a) says a corporation with a valid federal election under section 1362(a) is an S corporation for California purposes, and the Franchise Tax Board's S corporation page says IRS approval is required for S election status. Section 23801(h) applies the federal authority to treat late elections as timely. Its specific late-filing rule still names Rev. Proc. 97-48, a procedure that Rev. Proc. 2013-30 partly incorporated and superseded, and it treats the corporation as an S corporation for California once the IRS has accepted the late election, with a copy of the acceptance notice to be given to the FTB on request. Keep that letter with the firm's records, and confirm the California treatment when the request is filed.

California also taxes S corporations at the entity level: the FTB says every S corporation with California source income pays tax at 1.5% and the annual $800 minimum franchise tax, with the minimum tax waived for a new S corporation's first taxable year. How the entity choice plays out for a California firm is covered in which entity a California law firm can use, and how it is taxed.

What changes the answer

• How late you are. Within 3 years and 75 days of the intended effective date, the simplified procedure is available (Rev. Proc. 2013-30, section 5). Beyond it, only the narrower path in section 5.04 or a letter ruling.
• How the returns were filed. If the firm filed Form 1120 as a C corporation, or a shareholder reported inconsistently, the consistency requirement is harder to meet (Instructions for Form 2553).
• Whether the IRS has already flagged it. The section 5.04 path requires that the IRS not have notified the corporation or a shareholder of a problem with S status within 6 months of the first Form 1120-S (Rev. Proc. 2013-30).
• The type of entity. An LLC or PLLC may need classification relief as well, with its own conditions (Instructions for Form 2553; Rev. Proc. 2013-30).
• Whether the firm was eligible. No more than 100 shareholders, only eligible shareholders and one class of stock; relief covers late filing only (Instructions for Form 2553).
• The firm's standing with the state. An S election does not keep a California corporation in good standing; the FTB says the $800 minimum franchise tax is owed whether the corporation is active, inactive or operating at a loss. A suspended entity has bigger problems than its tax election; see what happens if California suspends your law corporation.

For example: a professional corporation formed in early 2025

For example, imagine a lawyer who forms a professional corporation that first has assets and begins business on February 2, 2025. She means it to be an S corporation from the start, so Form 2553 was due by April 16, 2025: the 2-month period ended April 1, and 15 days after that is April 16. Her accountant prepared a 2025 Form 1120-S and she reported her K-1 income, but in September 2026 a new bookkeeper finds that no Form 2553 was ever filed. She is well within 3 years and 75 days of February 2, 2025. She files Form 2553 marked "FILED PURSUANT TO REV. PROC. 2013-30," with line E showing February 2, 2025, a signed statement explaining what happened and when she found it, and her consent as sole shareholder. If the IRS accepts it, the election applies from February 2, 2025. This is a hypothetical, not a real case.

Common mistakes with late elections

• Assuming the formation service filed it. Forming the entity with the state and electing S status with the IRS are separate filings.
• Filing Form 1120-S without ever filing Form 2553. The returns look right, but there is no election behind them until relief is granted.
• Waiting after the problem is found. Relief requires diligence once the mistake is discovered, so delay weakens the request.
• Missing a consent. Former shareholders during the gap period, and spouses with a community interest in the shares, must consent too.
• No proof of filing. If the IRS questions whether the form was filed, the instructions accept a timely postmarked certified or registered mail receipt, a copy with an IRS accepted or received stamp, or an IRS acceptance letter.
• Forgetting payroll. An S corporation owner who works in the firm needs a reasonable salary for every year the election covers.

What to do this week

1. Check whether the IRS has an election on file, using any acceptance letter in your records.
2. Identify the date the firm first had shareholders, assets or business, and the date you meant S status to start.
3. Count 3 years and 75 days from that date and put the deadline on the calendar.
4. Gather every federal return filed for the entity and its shareholders since that date.
5. List everyone who held shares since then, including spouses with a community interest.
6. Write down how and when the missing election was discovered.

Frequently asked questions

Can I just let the election start next year?

Yes. A late Form 2553 generally takes effect for the tax year after the one entered on line E, with no reasonable cause showing. Relief matters only if you want the earlier year.

How long does the IRS take to respond?

The instructions say a determination should generally arrive within 60 days of filing. If you hear nothing within 2 months, the IRS asks you to follow up by phone.

Is there a fee?

Not for relief under Rev. Proc. 2013-30. A private letter ruling, needed when the procedure does not apply, carries a user fee set by the IRS's annual revenue procedure.

What if the request is denied?

The election would take effect only from a later year, and returns filed as an S corporation for earlier years may need to be corrected. The ways to correct past filings are explained in how to correct a past tax mistake.

Does relief fix the owner's payroll for those years?

No. If the election covers years in which you took only distributions, the question of how much salary an S corporation owner should take still applies to those years. Any wages then run through payroll under the rules for when a small law firm has to deposit payroll taxes.

Where is the form sent?

It depends on the state of the firm's principal office. Under the current instructions, Virginia firms file with the Kansas City service center and California firms with Ogden, and both accept fax filings.

Can the IRS question the election later?

The election, and the returns filed under it, can come up in an examination like any other item. What to expect is covered under IRS audits and examinations.

Getting the election on record

Kathryn Meyer spent more than two decades in the IRS Office of Chief Counsel and helps law firms put their entity and tax elections in order. The Annual Tax Health Checkup includes a review of business structure and entity status. Contact the firm or call (571) 560-8674.

Sources

• IRS, Instructions for Form 2553 (12/2020)
• IRS, About Form 2553, Election by a Small Business Corporation
• IRS Rev. Proc. 2013-30
• California Revenue and Taxation Code section 23801
• Franchise Tax Board, S corporations