S-Corp election timing
Submitted by Anonymous on Mon, 2008-03-03 14:41.
Question re. election of s-corp: Individual, let's call her Jane, forms an entity in 2005. It's primary purpose is for health care consulting. Jane does not engage in any consulting work until 2007. No tax returns are filed for 2005 and 2006. She didn’t realize she had to file an s-corp election. Jane is preparing for 2007 taxes and realizes no s-corp election has been filed. Is it too late for 2007 to elect s-corp status? What does she do for her income in 2007? She is the only employee. Thanks!
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Late Filing S Election
Usually you have 75 days from your incorporation date to file the S-election Form 2253. However there are a couple of ways to file a late election.
If less than 24 months have passed since the original due date of the election, you can make the s-election pursuant to Rev. Proc. 2003-43. However, for this relief for late election to be accepted either the request must come within 6 months of the first due date 1120S or all previous year's tax returns would have to have been filed as an S Corp. So it doesn't sound like this will work for you.
For tax year 2007 and later you can file the Form 2553 with the 1120S and request late election relief pursuant to Rev. Proc. 2007-62. The 2553 must include a statement explaining reasonable cause for why the election was late. You must also write "Filed Pursuant to Rev. Proc. 2007-62" across the top of the Form 2553.
You will have to file 2005 & 2006 as a C corp. But if you had no income or expense, then it shouldn't be a problem.
Hope this helps.
late s election
Would not knowing or not realizing -basically ignorance- that you had to file an s-corp election a reasonable cause for why the election is being filed late?
Thank you.
Late Election "reasonable cause"
Sort of. You have to phrase it nicely but yes. What most people do is end up blaming the accountant. :( The language I see often is something like "...there was a misunderstanding as to the filing responsibility which kept the S Election Form 2553 from being filed in a timely manner."
You might need other language in your reasonable cause statement depending on which Rev. Proc. you're using the request the Late Election Relief, which is often the tricky part. If you pick the wrong one it could be denied, but you can always refile the Form 2553.
L:)