Rev. Proc. 2022-32: Relief for Late S Corp Elections

The Internal Revenue Service provides a simplified method under Revenue Procedure 2022-32 for businesses to request relief for late S corporation elections. This process offers a way to correct a missed deadline for filing Form 2553 without undergoing the complex and costly private letter ruling process. The procedure is designed for entities that intended to be taxed as an S corporation from a specific date but failed to file on time. This relief also covers several related elections that may have been missed concurrently.

Eligibility Requirements for Relief

To qualify for relief, an entity must meet several criteria. The business must have intended to be an S corporation but failed to qualify solely because its election was not filed by the deadline, which is two months and 15 days after the start of the tax year. Relief must be requested within three years and 75 days of the intended effective date.

The entity must also have a reasonable cause for its failure to file the election on time and provide a statement explaining the reason for the missed deadline.

Finally, the corporation’s actions after the missed deadline must be consistent with its intent to be an S corporation. This means it must have filed all required federal tax returns, such as Form 1120-S, for all years from the intended effective date as if the S election had been in effect. Any inconsistencies in filing history can jeopardize the relief request.

Elections Covered by the Procedure

The relief extends beyond the main S corporation election to include several related elections that are often made at the same time. The procedure covers the late filing of:

• The S corporation election on Form 2553.
• The Electing Small Business Trust (ESBT) election, which is required for this type of trust to be an eligible S corporation shareholder.
• The Qualified Subchapter S Trust (QSST) election, another type of trust permitted to hold S corporation stock.
• The Qualified Subchapter S Subsidiary (QSub) election on Form 8869, which is filed by a parent S corporation for a 100% owned subsidiary.

Required Information and Statement Preparation

A statement must be prepared and attached to the completed tax return. This statement requires a header at the top of the page that reads: “FILED PURSUANT TO REV. PROC. 2022-32.” The body of the statement must include the entity’s legal name, mailing address, Employer Identification Number (EIN), the intended effective date of the S corporation election, and the contact information for the person submitting the request.

The statement must also include a section with a factual account of why the election form was not filed on time, which serves as the “Reasonable Cause Statement.” The entire document must conclude with a penalties of perjury declaration with the following wording: “Under penalties of perjury, I declare that I have examined this statement, and to the best of my knowledge and belief, the facts presented in support of this election are true, correct, and complete.” This must be signed and dated by a corporate officer authorized to sign tax returns.

The Filing Procedure

The signed statement must be attached to the completed tax return, which is Form 1120-S, the U.S. Income Tax Return for an S Corporation. The entity must also write “INCLUDES LATE ELECTION(S) FILED PURSUANT TO REV. PROC. 2022-32” at the top of the first page of the tax return. This notation is a specific requirement of the procedure.

The complete package should be filed with the IRS service center where the entity normally files its returns. After filing, the IRS will review the request. If accepted, the IRS will send an acceptance letter to the entity confirming the S corporation status and its effective date.