S Corp Election Deadlines: Missing Them Costs You a Full Tax Year

Missing an S Corp election deadline can change how your business is taxed for the intended tax year. Business owners researching how to start an S Corp should understand when Form 2553 is due and what happens after a late filing. Knowing the deadline early can help you avoid an unwanted delay in your S Corp tax election.

What Is the S Corp Election Deadline?

A business generally must file Form 2553 no more than two months and 15 days after the beginning of the tax year when the S Corp election should take effect. It can also file during the tax year immediately before that year.

For an existing calendar-year business seeking S Corp status effective January 1, the usual deadline is March 15. For a new business whose first tax year begins after January 1, the filing deadline may fall on a different date based on when that tax year begins.

What Happens If You Miss the S Corp Election Deadline?

If you file after the deadline and do not qualify for late-election relief, the election generally will not take effect for the intended tax year and may instead take effect for the following tax year. Your business must continue filing under its applicable federal tax classification until the election becomes effective.

This delay can affect the tax treatment you expected for that year. The exact impact depends on your existing business classification and tax situation. However, missing the deadline does not always mean losing S Corp status for the full year because IRS late-election relief may apply.

Can You Fix a Late S Corp Election?

The IRS provides late-election relief under Revenue Procedure 2013-30 when businesses meet specific requirements. Generally, the business must have intended to elect S Corp status and failed to qualify solely because it did not file the election by the required deadline.

The business must show reasonable cause for filing late and act diligently after discovering the error. The business and its shareholders generally must also have reported income consistently with the intended S Corp election. In most cases, you must request relief within three years and 75 days of the intended effective date, although an exception may apply in certain cases.

How Can You Avoid Missing the S Corp Election Deadline?

Understanding filing requirements early is important when researching how to start an S Corp. To reduce the risk of missing the election deadline, consider these steps:

• Confirm Eligibility: Check whether your business meets IRS requirements for electing S Corp status.
• Set the Effective Date: Decide when you want the S Corp election to take effect.
• Calculate the Deadline: Determine the Form 2553 filing deadline based on the intended effective date.
• File Form 2553: Submit the completed and signed form within the applicable filing period.
• Keep Filing Proof: Retain acceptable proof of filing and any IRS letter confirming that the election was accepted.

Following these steps can give you time to identify and address filing issues before they affect your intended election date.

Conclusion

Missing the S Corp election deadline can delay the tax treatment you expected for your business. However, eligible businesses may receive late-election relief when they meet IRS requirements. Confirm your intended effective date, calculate the Form 2553 deadline and retain proof of filing. If you have already missed the deadline, consider seeking professional tax guidance promptly.