Late Classification Relief 2009-41: How to File

IRS Revenue Procedure 2009-41 offers a simplified method for certain businesses to correct a failure to file an initial entity classification election. This procedure allows an eligible entity, such as a limited liability company (LLC) that intended to be taxed as a corporation but missed the filing deadline, to request relief. The process provides a pathway for businesses to align their tax classification with their original intent without undergoing a more complex and costly private letter ruling process. It specifically addresses situations where the default tax classification assigned by the IRS does not match the entity’s desired tax structure.

Eligibility Requirements for Relief

To qualify for relief under these simplified procedures, an entity must meet several conditions. A primary requirement is that the entity must have reasonable cause for its failure to file the election on time. Reasonable cause is interpreted as an honest mistake or reliance on professional advice, not an attempt to avoid tax obligations. For instance, if a tax professional was unaware of the filing requirement or provided incorrect guidance, this could be a valid reason.

The timeline for requesting relief is strict. The request must be submitted within 3 years and 75 days of the election’s requested effective date. Missing this deadline makes the entity ineligible for this simplified relief method, forcing it to seek a private letter ruling from the IRS.

An entity is also ineligible if the IRS has already discovered the classification failure and notified the entity of the delinquency before the relief request is filed. The entity must take the initiative to rectify the error before it becomes an issue in an IRS examination.

Finally, the entity must have a consistent tax filing history. This means that for all prior years, the entity and its owners must have filed all required federal tax returns consistent with the classification it is now requesting. For example, an LLC seeking to be classified as an S corporation must have filed Form 1120-S for all relevant years.

Required Documentation and Statements

The primary document for seeking relief is the election form itself, completed as if it were being filed on time. The specific form and required notation depend on the type of election.

For a late entity classification election, such as an LLC choosing to be taxed as a corporation, you must file Form 8832, Entity Classification Election. At the top of the form, you must write “FILED PURSUANT TO REV. PROC. 2009-41.”

For a late S corporation election, you must file Form 2553, Election by a Small Business Corporation. The relief for this specific election is governed by a separate procedure, so the notation at the top of this form should state “FILED PURSUANT TO REV. PROC. 2013-30.”

Attached to the election form must be a detailed relief statement. This statement must explain the reasonable cause for the late filing by narrating the specific events and circumstances that led to the failure, such as miscommunication or erroneous advice. The statement must also describe the due diligence the taxpayer exercised, showing the failure was not due to willful neglect. This relief statement must contain specific declarations made under penalty of perjury, signed by the taxpayer, affirming that the entity meets all the requirements for relief.

The Filing Process for Relief

The complete relief package can be filed in one of two ways. The first option is to attach the package, which includes the completed election form with the correct notation and the signed relief statement, to the entity’s tax return for the first year the election was intended to be effective. If that return has already been filed, the package should be attached to an amended return.

Alternatively, the relief request can be filed separately. The entire package can be mailed or faxed directly to the appropriate IRS service center where the entity’s returns are processed.

Post-Filing Procedures and Considerations

The post-filing process differs depending on the type of election relief requested. For a late entity classification election filed under Revenue Procedure 2009-41 (Form 8832), relief is considered granted if the entity meets the eligibility requirements and has filed the request correctly. The IRS does not typically send a formal approval or determination letter.

However, for a late S corporation election filed under Revenue Procedure 2013-30 (Form 2553), the IRS will review the request and typically send an acceptance or denial letter. If you do not receive any communication from the IRS within 60 days of filing, you should contact them to check the status of your request.

In either case, the entity should proceed as if the election will be approved and continue to file all subsequent tax returns consistent with the requested classification. The IRS retains the right to review the entity’s eligibility during a subsequent examination. If an audit reveals that the entity did not meet the requirements for relief, the IRS can retroactively invalidate the election, so maintaining all documentation related to the relief request is important.