Rev. Proc. 2022-32: Relief for Late S Corp Elections
Rev. Proc. 2022-32 provides a simplified method for certain foreign entities to validate a late S corporation election and achieve their intended tax status.
Revenue Procedure 2013-30 provides a simplified method for businesses to obtain relief for a late S corporation election. This process allows companies to correct a late filing without needing to request a private letter ruling, which is a more complex and costly process. The relief is for entities that intended to be classified as an S corporation but failed to file the required Form 2553, Election by a Small Business Corporation, by the deadline.
Eligibility Requirements for Relief
An entity must be an eligible type of business, such as a domestic corporation, that intended to be classified as an S corporation but failed to qualify solely because the S election was not filed on time. The entity must have reasonable cause for its failure to make a timely election. Under the simplified procedure, reasonable cause is deemed to exist if the request for relief is filed within three years and 75 days of the intended effective date, which removes the burden of proving a specific reason for the late filing.
The entity and all of its shareholders must have reported their income consistent with S corporation status for the year the election was intended to be effective and for all subsequent years.
Information and Statements Needed for Relief
To request relief, the entity must prepare a complete and accurate Form 2553. It requires the intended effective date of the S election and the signature consents of all shareholders who owned stock at any point from the intended effective date to the date of filing. A statement must be attached to the top of the Form 2553 indicating that the submission is being filed pursuant to Rev. Proc. 2013-30 and should explain that the entity had reasonable cause for failing to file timely.
Separate statements are required from every shareholder who was a shareholder from the intended effective date until the filing date. Each shareholder statement must be signed under penalties of perjury. It must declare that the shareholder has reported their income on all affected tax returns consistent with the S corporation election for the year the election should have been made and for all subsequent years. These individual attestations are necessary to confirm to the IRS that all parties have complied with the tax reporting requirements of an S corporation.
Procedural Steps for Requesting Relief
The statements should be securely attached to the front of the Form 2553. The completed package must be filed with the same IRS service center where the entity files its annual tax return. The specific mailing address can be found in the instructions for Form 2553.
After submission, the entity should not expect to receive a formal letter ruling from the IRS National Office confirming approval. Instead, the IRS service center that processes the form will review the submission. If the request is accepted, the IRS will notify the entity that the S corporation election is approved, and this notification serves as confirmation that relief was granted.
Scope of Relief Granted
Relief is automatically granted for the late S corporation election if the request is accepted. This relief also extends to any late entity classification election that was a prerequisite for the S election, such as an LLC electing to be taxed as a corporation. The S corporation status will be effective as of the date specified on the Form 2553. The acceptance of the Form 2553 by the IRS service center is the final confirmation of the approved relief.