Shareholders consent to
Subchapter S corporation status on Form 2553, Election by a Small Business Corporation.
The form can be filed any time during a tax year prior to the year the
Subchapter S
election is to begin, or the form can be filed by the 15th day of the 3rd
month of the tax year to which the election is to apply. Note: In
community property states the Subchapter S corporation shareholder’s spouse must also sign Form
2553.
Late Subchapter S Corporation Election
Revenue Procedure 97-40: Allows a
six-month grace period during which a request for relief for late filing
may be granted without imposition of a user fee.
Revenue Procedure 98-55: Extends the
grace period under Rev. Proc. 97-40 from 6 months to 12 months.
To request relief from late filing of
Subchapter S corporation Form
2553:
1) File Form 2553 within 12 months of the
original due date for making the Subchapter S election.
2) All Subchapter S corporation shareholders must sign Form 2553.
3) Write at top of Form 2553: "Filed
Pursuant to Rev. Proc. 98-55."
4) Attach a statement to the form
explaining the reason for failure to file the election in a timely manner.
The IRS will notify the Subchapter S
corporation of its
determination.
Revenue Procedure 97-48: Provides
automatic relief for late Subchapter S corporation elections that are beyond the
12-month grace period of Revenue Procedure 98-55.
Automatic relief is granted if:
1) Corporation fails to qualify as a
Subchapter S corporation solely because Form 2553 was not timely filed,
2) Corporation and Subchapter S corporation
shareholders reported
income consistent with S corporation status,
3) At least six months have elapsed since
the first return for which the Subchapter S corporation intended to be an S corporation
was filed, and
4) Neither the Subchapter S corporation nor any
shareholders were notified by the IRS of any problem with S corporation
status within six months of filing the S corporation return.
Procedure: See
Revenue Procedure 97-48 for information about how
to apply for automatic relief.
Private Letter Ruling: If a
corporation does not qualify for automatic relief under one of the above
Revenue Procedures, it can still request relief under a private letter
ruling, subject to user fees.
