Revenue Procedure 2009-41 vs. 2010-32: Which Do You Need?

Missing a due date for a tax election can be a costly error for a business. The Internal Revenue Service (IRS) recognizes that such oversights occur and has established procedures to provide relief. These pathways allow businesses to correct certain late filings and align their tax status with their original intent.

Relief for Late S Corporation Elections

An S corporation election, made by filing Form 2553, allows a business to pass its income, losses, deductions, and credits through to its shareholders. Shareholders report this information on their personal tax returns, which can prevent the double taxation that occurs when a traditional corporation pays tax at the corporate level and shareholders pay again on dividends.

To obtain relief for a late S corporation election under Revenue Procedure 2013-30, a business must meet several conditions. The entity must have intended to be an S corporation from a specific date, and its failure to qualify must be solely because it did not file Form 2553 on time. The business must also demonstrate it had reasonable cause for the late filing.

Eligibility for this relief extends for up to three years and 75 days after the intended effective date. The entity must also meet all standard S corporation requirements, such as being a domestic corporation with no more than 100 permissible shareholders and having only one class of stock. Meeting these conditions allows a business to file for relief and have its S corporation status applied retroactively.

Relief for Late Entity Classification Elections

Limited liability companies (LLCs) can choose how they are classified for federal tax purposes through an entity classification election, known as the “check-the-box” election, by filing Form 8832. Without this election, a domestic LLC with a single member is treated as a disregarded entity, and an LLC with multiple members is treated as a partnership. Filing Form 8832 allows these entities to elect to be taxed as a corporation.

Revenue Procedure 2009-41 provides relief for a late entity classification election if the business failed to get its desired classification only because Form 8832 was not filed on time. The entity must have reasonable cause for the late filing. A requirement for this relief is that the business must have filed all federal tax returns consistent with the classification it is now requesting. If no return was required, the owners must have filed their individual returns as if the election had been in place.

Key Distinctions and Choosing the Correct Procedure

The correct relief procedure depends on which form was not filed on time. Revenue Procedure 2013-30 is for a late Form 2553 (S corporation election), while Revenue Procedure 2009-41 is for a late Form 8832 (entity classification election).

A common point of confusion arises when an LLC wants to be taxed as an S corporation, which is a two-step process. First, the LLC must elect to be taxed as a corporation by filing Form 8832. Then, it must file Form 2553 to elect S corporation status.

If an LLC fails to file Form 8832, it cannot be an S corporation because it is not considered a corporation for tax purposes. In this scenario, the business needs relief for both elections. The IRS provides a simplified path, allowing a qualifying entity to receive relief for both by filing a late Form 2553, provided it can show reasonable cause.

How to Request Relief

To request relief for a late S corporation election, file the completed Form 2553 with the appropriate IRS service center and write “FILED PURSUANT TO REV. PROC. 2013-30” at the top. Part I, Line I of the form, or an attached statement, must include a reasonable cause explanation for the late filing. This statement should detail the events that led to the failure and the actions taken to correct it.

For a late entity classification election, file a completed Form 8832 and indicate it is being filed pursuant to Revenue Procedure 2009-41. You must attach a statement explaining the reasonable cause for the late filing. This declaration must be signed under penalties of perjury by an authorized representative of the entity.

In the common scenario where an LLC seeks late S corporation status, it files only Form 2553. Part IV of Form 2553 is designed for late corporate classification election representations. By completing this section and providing a reasonable cause statement, the LLC requests relief for both elections in a single filing.