Electing S Corp Status
S Corp Election Deadlines
You can still elect S Corp status for future tax years if you miss the initial deadline. Established businesses typically have until March 15th, while new businesses have until 2 months and 15 days from when they were formed. To make a late election for S Corp status, you must:
- File Form 2553
- Provide a reason for late filing, which is usually accepted by the IRS without much issue
Remember that the election must be made no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year preceding the tax year it is to take effect.
S Corp Advantages for LLCs and Corporations
An S Corp is a tax designation that can be advantageous for both LLCs and corporations, offering benefits like pass-through taxation and liability protection. It allows LLC members or owners to report business income and deductions on their personal tax returns.
Filing Requirements and Considerations
- Be a domestic corporation
- Have only one class of stock
- Have no more than 100 shareholders who are all U.S. citizens or residents
- For established businesses, the IRS Form 2553 deadline is generally March 15th
- Late election applications should include Part IV: Late Corporate Classification Election Representations
Late S Corp Election Process
If you find yourself needing to file a late S Corp election, here is the process:
- Download and complete Form 2553 with signatures from all business officers and shareholders.
- On line I of Form 2553, justify your reason for filing late.
Potential Pitfalls to Avoid
Cautions When Electing S Corp Status
- Proceed with caution when transitioning an LLC to be taxed as an S-Corp, as this decision should not be made hastily.
- Consider consulting with a reputable CPA firm or tax professional before making any changes.
- Be aware of the paperwork requirements, such as filing informational returns (Form 1120S) and issuing K-1s to shareholders.
Replacement of Lost Forms
In case you lose Form 2553, you must contact the IRS to get a new copy, providing necessary details to confirm your identity.
Additional Information
- As of the writing of this article, there is no information on extended tax deadlines for the year in question.
- If you are applying as a trust for S corp status, ensure all required beneficiary and trust information is listed.
- An LLC may elect S corp status at any time during the tax year prior or within the 2 months and 15 days deadline.
Resources for S-Corporations
- Our "Complete Guide to S Corporations for Therapists" covers in-depth information.
- If you require legal assistance, consider posting a job to get quotes from experienced lawyers.
For more small business tax information and how an S-Corp can reduce taxes, seek advice from tax experts and review all documents before filing.