Rev Proc 2022-19: How to Fix a Late S Corp Election

An S corporation election offers certain tax advantages, but strict filing deadlines must be met. Missing the deadline to file Form 2553, Election by a Small Business Corporation, can lead to unintended tax consequences. The Internal Revenue Service (IRS) provides a method for businesses to correct this error through Revenue Procedure 2022-19. This procedure allows certain entities to fix a late S corporation election without the complex and often expensive process of requesting a private letter ruling (PLR).

Scope of Available Relief

Revenue Procedure 2022-19 provides remedies for several common election issues that can invalidate or terminate a corporation’s S status. This relief allows an election to be treated as timely filed from its intended effective date, securing the intended tax status. The procedure addresses a late S corporation election, where Form 2553 was not filed by the deadline, typically the 15th day of the third month of the tax year.

The procedure also extends to late elections for trusts that hold S corporation stock, such as a Qualified Subchapter S Trust (QSST) or an Electing Small Business Trust (ESBT). Since these elections are necessary for certain trusts to be permissible shareholders, a failure to file on time can inadvertently terminate the S election for the entire corporation. Relief under the procedure validates these trust elections retroactively.

Other situations covered include a late election for a Qualified Subchapter S Subsidiary (QSub) on Form 8869. The guidance also addresses cases where a business, intending to be an S corporation from its inception, files a late corporate classification election on Form 8832 alongside its late S corporation election.

Eligibility Requirements for Using the Procedure

To use the simplified relief offered by this procedure, a corporation must meet several criteria. The failure to qualify as an S corporation must be solely because the election was not filed on time. This procedure cannot be used if other disqualifying issues exist, such as having an ineligible shareholder or more than one class of stock.

The request for relief must be filed within three years and 75 days of the intended effective date of the S corporation election. This window is measured from the date the election was supposed to have taken effect. Missing this deadline makes the corporation ineligible for this simplified method.

A business is ineligible if the IRS has already discovered the late election and notified the corporation or its shareholders. This relief is for taxpayers who proactively identify and correct their own errors. The procedure is also unavailable if the failure to file was for any reason other than an oversight or mistake.

Furthermore, the entity must have intended to be an S corporation as of the requested effective date and must demonstrate that it had reasonable cause for its failure to make a timely election. The corporation and its shareholders must also have consistently filed tax returns as if the S election had been in effect, even though it was technically invalid. Any filings inconsistent with S corporation status can jeopardize eligibility for this relief.

Required Information and Statements for Submission

Obtaining relief requires a carefully prepared submission package. The central document is Form 2553, Election by a Small Business Corporation, which must be completed in its entirety. It must reflect the corporation’s information and the intended effective date as if it were being filed on time. This includes the corporation’s legal name, address, Employer Identification Number (EIN), and details for each shareholder, all of whom must sign to consent to the election.

In addition to Form 2553, the submission package must include several key attachments:

• A Procedural Relief Statement that explicitly states the corporation is requesting relief for a late election under Revenue Procedure 2022-19.
• A detailed reasonable cause explanation within the statement, describing the specific events and circumstances that led to the failure to file on time. This should be a factual narrative explaining the oversight.
• A due diligence statement affirming the corporation acted reasonably and in good faith to remedy the failure upon its discovery.
• Signed statements from every shareholder who owned stock from the intended effective date to the submission date. Each statement must declare consent to the S election and affirm the shareholder has reported income on their personal tax returns (Form 1040) consistent with the corporation being an S corporation for all affected years.

The Filing Procedure

After preparing the documents, the next step is to assemble and submit the relief request. The completed Form 2553 is the primary document, and the Procedural Relief Statement and all signed shareholder statements must be securely attached.

To ensure correct processing, the phrase “FILED PURSUANT TO REV. PROC. 2022-19” must be written at the top of the first page of Form 2553. This notation flags the form for the special handling associated with this relief procedure. Failure to include this wording could result in the request being processed incorrectly.

The complete package must be mailed to the correct IRS service center, which depends on the location of the corporation’s principal business office. Filers must consult the official instructions for Form 2553 to determine the correct address for their jurisdiction. Using the wrong service center can cause significant delays or lead to the package being lost.

The IRS will not issue a formal approval letter or a private letter ruling (PLR) confirming that relief has been granted. Instead, relief is considered granted if the IRS accepts the corporation’s subsequent Form 1120-S, U.S. Income Tax Return for an S Corporation. The corporation should proceed to file its tax returns as an S corporation for the election year and all subsequent years.

Effect of Granted Relief

When a request filed under Revenue Procedure 2022-19 is accepted, the effect is comprehensive and retroactive. The corporation’s S election, or other related election like a QSST or QSub election, is treated for all legal and tax purposes as if it had been filed on time. This validation is retroactive to the intended effective date specified on the submitted Form 2553.

This retroactive validation formally corrects the initial filing error and solidifies the corporation’s tax status. The entity will be officially recognized as an S corporation from the intended date, preventing the IRS from later challenging its status based on the late filing. This provides certainty to the business and its owners, ensuring that the intended tax treatment is secured for past, present, and future years, assuming the corporation continues to meet all other S corporation requirements.

The granted relief ensures consistent tax treatment for both the corporation and its shareholders. Because the shareholders have already affirmed in their statements that they reported their income consistent with an S election, the retroactive approval aligns the corporation’s official status with the tax returns that have already been filed. This prevents the need for amended returns and avoids potential conflicts between how the shareholders reported income and the corporation’s official classification, thereby validating the pass-through of income, losses, deductions, and credits.