IRS grants late S corporation election relief after missed Form 2553 deadline

PLR 202551020. §1362(b)(5)

The IRS allowed a corporation to retroactively elect S corporation status after it missed the original filing deadline, because the failure was due to reasonable cause and not intent.

Overview of Relief

The Internal Revenue Service granted relief to a newly formed corporation that failed to timely file Form 2553 to elect S corporation status. The IRS treated the late election as timely under §1362(b)(5).

Key Facts

• The taxpayer was incorporated under state law on the formation date.

• The corporation intended to be taxed as an S corporation starting on that same date.

• Form 2553 was not filed by the statutory deadline.

• The failure was inadvertent.

• The taxpayer requested late-election relief through a private letter ruling.

Statutory Framework

• §1362(a) allows a qualifying small business corporation to elect S corporation status.

• §1362(b)(1) requires the election to be filed by the 15th day of the third month of the taxable year.

• §1362(b)(3) shifts a late-filed election to the following year if filed within the next 12 months.

• §1362(b)(5) allows the IRS to treat a late election as timely if the taxpayer shows reasonable cause.

IRS Analysis

• The corporation intended to make a timely S election.

• The failure to file Form 2553 was not deliberate.

• The taxpayer provided representations supporting a reasonable cause determination.

• The IRS relied solely on the facts and representations submitted.

Conditions of Relief

Relief applies only if all of the following occur:

• Form 2553 is filed within 120 days of the ruling date.

• The election lists the intended effective date.

• A copy of the ruling is attached to Form 2553.

• All required federal returns are filed or amended, as applicable, consistent with S corporation treatment.

• Copies of the ruling are attached to any such returns.

Limitations

• The ruling does not confirm that the corporation otherwise qualifies as an S corporation.

• The ruling applies only to the requesting taxpayer.

• The ruling cannot be cited as precedent under §6110(k)(3).

• The IRS did not independently verify the submitted facts.

Result

The IRS treated the late-filed S corporation election as timely, provided it complied with the filing conditions.

The Takeaway

Late S elections remain fixable when the taxpayer can show reasonable cause and acts quickly. This ruling follows the IRS’s standard approach and reinforces that procedural mistakes alone do not automatically bar S corporation status.