Late S corporation election relief explained

Missing the Form 2553 deadline is a common and usually fixable mistake. A business that intended to be an S corporation, behaved as one, but simply never filed the election on time is not automatically stuck as a C corporation — the IRS has a simplified relief procedure for exactly this situation. This guide explains what happens when the election is late, the relief that Revenue Procedure 2013-30 provides, and the conditions that must be met to use it.

What a late election means

The S election has a strict deadline, covered in Form 2553: generally within two months and 15 days of the start of the tax year the election is to take effect. If the form is not filed in time and no relief applies, the entity is not an S corporation for that period — it is taxed under its default classification, typically as a C corporation, which is usually the opposite of what the owners wanted. The mismatch tends to surface when the business goes to file Form 1120-S and realises the election was never validly in place.

The relief procedure

Rather than force every late filer into a formal private letter ruling, the IRS consolidated the relief rules into a single simplified procedure, Revenue Procedure 2013-30. It lets an eligible business make a late S corporation election — and, where relevant, related late elections such as ESBT, QSST, and QSub elections intended to take effect on the same date — and have the election treated as effective from the date originally intended, provided the conditions are satisfied. Used correctly, it restores the position the owners meant to be in, without the cost and delay of a ruling request.

The conditions

Relief under the procedure turns on a set of requirements that, taken together, show the failure was a timing slip rather than a change of plan:

• The entity intended to be classified as an S corporation as of the intended effective date, and was an eligible entity.
• It failed to qualify solely because the election was not filed on time.
• It has reasonable cause for the failure and acted diligently to correct it once discovered.
• The entity and all its shareholders reported consistently — as if the S election had been in effect — for the year the election should have started and every year since.

That last condition does much of the work: relief is designed for businesses that behaved like an S corporation all along, so a history of consistent reporting is what makes the case, and inconsistent returns undercut it.

Making the request and the time limit

In practice the late election is made by filing Form 2553 itself, marked as filed under the revenue procedure, with a statement of the reasonable cause for the late filing and the required shareholder statements — either attached to a timely filed return or filed on its own, depending on the situation. The simplified relief generally reaches back where the request is made within three years and 75 days of the intended effective date, with some situations handled differently. Outside that window, the simplified route may close and a more involved process apply. Because the timing and documentation rules are specific, and because eligibility must have been continuous — a lapse such as admitting a nonresident alien shareholder is a separate problem relief will not cure — the details are worth confirming before relying on relief.

Sources

This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.

• Late election relief (IRS)
• Instructions for Form 2553 (IRS)

Questions people also ask