Rev. Proc. 2022-14: Late S Corp Election Relief
Understand Rev. Proc. 2022-14, the IRS's consolidated framework for granting retroactive relief for an untimely S corporation election.
Revenue Procedure 2013-30 offers a simplified method for businesses to get relief for late S corporation elections. This Internal Revenue Service (IRS) guidance helps eligible entities avoid the high costs and complexities associated with requesting a formal private letter ruling (PLR).
The procedure provides a streamlined path for taxpayers who inadvertently failed to file their S corporation election on time. It consolidates several previous relief procedures into a single framework, superseding older guidance. This creates a uniform set of rules for addressing the late S corp election and certain other related missed elections.
Eligibility Requirements for Relief
To qualify for this simplified relief, a business must be a domestic entity eligible for S corporation status, such as a U.S. corporation or an LLC taxed as a corporation. The entity must have intended to be an S corporation by a specific date but failed to qualify only because its election form was not filed on time.
The application for relief must be submitted within three years and 75 days of the S election’s intended effective date. For example, if a business intended its S election to be effective on January 1, 2024, it would have until March 16, 2027, to file for relief.
The taxpayer must demonstrate “reasonable cause” for the failure to file on time. The IRS determines this on a case-by-case basis, but it involves situations where the taxpayer exercised ordinary business care but was unable to file on time due to circumstances beyond their control, like receiving incorrect advice from a tax professional.
The taxpayer must also show they acted with diligence to correct the mistake once it was discovered. The entity and all its shareholders must have filed all federal tax returns consistent with S corporation status for the intended election year and all subsequent years.
Required Information and Documentation
The primary document is Form 2553, “Election by a Small Business Corporation.” It must be completed with the entity’s legal name, Employer Identification Number (EIN), address, state and date of incorporation, and the intended effective date for the S election.
The shareholder section requires the name, address, and taxpayer identification number for every shareholder, along with stock ownership details like shares owned and acquisition dates. All shareholders must sign and date the form to consent to the election.
You must attach a “Reasonable Cause Statement” to Form 2553. This document should provide a factual narrative of the events that led to the late filing. The person signing for the corporation must include a declaration under penalty of perjury, affirming the statement’s facts are true, correct, and complete.
If relief is needed for other late elections, include the required documentation. For a trust shareholder that failed to make a timely Electing Small Business Trust (ESBT) or Qualified Subchapter S Trust (QSST) election, attach the necessary statements. Likewise, include the appropriate information for a subsidiary needing relief for a late Qualified Subchapter S Subsidiary (QSub) election.
The Filing Procedure
At the top of the completed Form 2553, write “FILED PURSUANT TO REV. PROC. 2013-30.” This notation alerts the IRS to process the submission under this simplified procedure.
The application package, including Form 2553 and all attachments, must be mailed to the IRS service center designated for the business’s location. The instructions for Form 2553 list the correct mailing addresses, which are typically in Kansas City, Missouri, or Ogden, Utah. Verify the address before mailing.
After submission, the IRS will review the application, which can take several months. If the requirements are met, the IRS will send a letter confirming the acceptance of the late election, making it valid as of the intended effective date. This letter serves as official documentation. If the request is denied, the IRS will issue a letter explaining the reasons.
Scope of Relief Provided
When the IRS grants relief, the business is treated for all tax purposes as if it had filed its S corporation election on time. The election becomes valid retroactive to the intended effective date specified in the application. This allows the entity to avoid being treated as a C corporation for the period between the intended effective date and the date relief was granted.
A key benefit of this procedure is its consolidated nature. A single submission can be used to request relief for multiple interconnected late elections, avoiding the need for separate requests.
The scope of this consolidated relief is broad and can resolve multiple issues at once, including:
- A late S corporation election on Form 2553.
- A late corporate entity classification election on Form 8832, for an entity like an LLC that intended to be taxed as a corporation.
- Late shareholder-level elections, such as the Qualified Subchapter S Trust (QSST) or Electing Small Business Trust (ESBT) elections.
- A late Qualified Subchapter S Subsidiary (QSub) election for a wholly-owned subsidiary.