The IRS recently consolidated its procedures for requesting relief for a late S corporation election filing. The changes, outlined in Revenue Procedure 2013-30, took effect on Sept. 3, 2013.
Created in 1958 by Subchapter S of the Internal Revenue Code, there are currently more than 4 million S corporations in the U.S., making it one of the most common business entities. S corporations must share four basic features – they must be a domestic enterprise, have a limited number of shareholders, be limited by who may be a shareholder and have only one class of stock. When creating an S corporation entity, entrepreneurs must file S corporation election with the IRS (Form 2553). Many business owners miss the deadline or fail to file the election altogether. As a result, the IRS issued procedures to allow late S corporation election relief if the entity meets certain qualifications, in order to save taxpayers the cost of private letter rulings and allow the IRS to prioritize its resources for processing private letter rulings.
The new Revenue Procedure 2013-30 consolidates and expands a number of previous procedures for requesting relief. The procedures apply to late S elections under Section 1362, late qualified subchapter S trust (QSST) elections, late electing small business trust (ESBT) elections, late qualified subchapter S subsidiary (QSub) elections and late corporation classification elections. The new procedure also expands the time limit for requesting relief for eligible late elections to three years and 75 days after incorporation. There is no deadline for simple S corporation election relief requests. Taxpayers whose late elections do not qualify for relief may still request a private letter ruling from the IRS.
This consolidation is positive for S corporations, but it can be complicated. And, consistent with prior Revenue Procedures, to qualify for late relief in any manner under RP 2013-30, certain requirements must be met. If you have questions, or need more information on how this may apply to your business, please contact a Caplan and Earnest Business Services attorney.