11.2 Election Deadlines, Late Election Relief (Rev. Proc. 2013-30)

S Corporation Election Mechanics: Form 2553 (IRC §1362)

A corporation does not become an S corporation automatically by meeting the eligibility criteria of IRC §1361. Under IRC §1362(a), the corporation must make an affirmative statutory election by properly completing and filing Form 2553, Election by a Small Business Corporation. The election requires strict adherence to statutory deadlines and unanimous shareholder consent.

Statutory Filing Deadlines (IRC §1362(b))

Under IRC §1362(b)(1), an election on Form 2553 may be made:

1. Current Year Effectiveness: On or before the 15th day of the 3rd month of the taxable year for which it is intended to take effect (for a calendar-year corporation, March 15);
2. Prior Year Filing: At any time during the taxable year immediately preceding the taxable year for which it is intended to take effect.

Calendar-Year S Corporation Election Deadlines
  ├── January 1: Tax Year Begins
  ├── March 15: Statutory Deadline for Current-Year Status (15th Day of 3rd Month)
  │     └── Filed on or before March 15 → Effective Jan 1 of Current Year
  └── March 16 through December 31: Late for Current Year
        └── Treated as automatically effective January 1 of FOLLOWING Tax Year (§1362(b)(3))
              (Unless streamlined late election relief is granted under Rev. Proc. 2013-30)

Short Taxable Years & Newly Formed Corporations (IRC §1362(b)(4))

For a newly formed corporation, its first taxable year is frequently a short tax year of less than 12 months. Under IRC §1362(b)(4), if the taxable year begins after the first day of a month and is 2 months and 15 days or less, an election filed within 2 months and 15 days after the beginning of the tax year is timely for that short period.

When Does a Corporation's Tax Year Begin? Under Treas. Reg. §1.1362-6(a)(2)(ii)(C), the first tax year of a new corporation begins on the earliest date that the corporation:

1. Has shareholders;
2. Acquires assets; or
3. Begins conducting business operations.

Example: Horizon Inc. files its articles of incorporation with the state on January 10, 2025. It issues stock to shareholders on January 20, acquires equipment on February 1, and begins business operations on February 15. Horizon's first tax year began on January 20 (the earliest date it had shareholders). To be an S corporation for its initial 2025 tax year, Horizon must file Form 2553 within 2 months and 15 days of January 20, which is April 4, 2025.

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Shareholder Consent Requirements (IRC §1362(a)(2))

Under IRC §1362(a)(2), all shareholders of the corporation must consent to the election. Consent is signified by signing Part I, Column K of Form 2553 (or attaching a separate consent statement meeting Treas. Reg. §1.1362-6(b)).

The "Prior Shareholder" Rule for Current-Year Elections

One of the most heavily tested traps on the Special Enrollment Examination concerns stock ownership changes prior to filing Form 2553:

• General Rule: Every person who is a shareholder on the day the election is made must consent.
• The Current-Year Retroactive Rule (§1362(b)(2)(B)(ii)): If the election is filed within the first 2 months and 15 days of the taxable year to be effective retroactively to the first day of that year, any person who held stock at ANY time during that year prior to the filing date must ALSO consent, even if that person holds zero shares on the date Form 2553 is actually signed!
• Consequence of Non-Consent: If any prior shareholder who owned stock between January 1 and the filing date refuses to sign, the election is not valid for the current tax year. Under IRC §1362(b)(2), the election automatically takes effect on the first day of the next taxable year.

Rules for Signatures by Entity and Property Type

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Ineligible Corporations (IRC §1361(b)(2))

Certain categories of domestic corporations are statutorily disqualified from electing S corporation status under IRC §1361(b)(2) regardless of shareholder count or stock structure:

1. Financial Institutions: Banks and financial institutions that use the reserve method of accounting for bad debts under IRC §585. (Banks using the direct charge-off method under §166 are eligible);
2. Insurance Companies: Companies subject to tax under Subchapter L (life insurance or property/casualty insurance companies);
3. DISCs: Domestic International Sales Corporations or former DISCs under IRC §992;
4. Foreign Corporations: Must be a domestic corporation organized in the U.S. or under U.S./state law.

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Deemed Corporate Election for LLCs (Treas. Reg. §301.7701-3)

Under the "check-the-box" entity classification regulations of IRC §7701, an eligible entity (such as a domestic limited liability company) defaults to a partnership (if multi-member) or a disregarded entity (if single-member). Traditionally, to become an S corporation, an LLC had to file Form 8832 to elect corporate association status and then file Form 2553 to elect S status.

The One-Step Safe Harbor

To eliminate redundant paperwork, the Treasury issued Treas. Reg. §301.7701-3(c)(1)(v)(C):

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Late Election Relief under Revenue Procedure 2013-30

Historically, missing the 2-month-and-15-day window for Form 2553 required taxpayers to seek a formal Private Letter Ruling (PLR) under Treas. Reg. §301.9100-3, incurring IRS user fees exceeding $38,000 plus substantial legal fees. To provide administrative relief, the IRS promulgated Revenue Procedure 2013-30, which established a single, consolidated, streamlined procedure for late S corporation elections.

Eligibility Criteria for Rev. Proc. 2013-30

A small business corporation or eligible entity (LLC) qualifies for automatic, user-fee-free late election relief if it satisfies all of the following requirements:

1. Statutory Time Window: The request is filed within 3 years and 75 days from the intended effective date of the S election;
2. Substantive Eligibility: The entity was eligible to be an S corporation on the intended effective date and complied with all IRC §1361 requirements at all times since;
3. Failure Solely Procedural: The entity failed to qualify as an S corporation solely because Form 2553 was not filed timely;
4. Reasonable Cause Standard: The entity had reasonable cause for its failure to timely file Form 2553 and acted diligently to correct the mistake upon discovery (e.g., reliance on a tax preparer, administrative oversight, illness, or mistaken assumption that software transmitted the form);
5. Consistent Tax Reporting: The corporation and all shareholders reported their income consistently with S corporation status on all affected federal tax returns (Form 1120-S and personal Form 1040 Schedule K-1 inclusions) for all tax years starting with the intended effective date through the date relief is requested; and
6. Shareholder Consent: All current shareholders—and any person who held stock at any time from the intended effective date to the date of filing—sign statements under penalties of perjury consenting to the late S election.

Procedural Mechanics of Filing under Rev. Proc. 2013-30

To request relief, the taxpayer must complete Form 2553 and comply with specific procedural directives:

• Legend at Top: The taxpayer must write or type across the top of Form 2553, Page 1: "FILED PURSUANT TO REV. PROC. 2013-30"
• Reasonable Cause Statement: Part IV of Form 2553 (or an attached narrative statement) must explicitly describe the reasonable cause for the late filing and state that the corporation and shareholders filed all returns consistently.
• Filing Options: The Form 2553 may be:
  • Attached to a timely filed Form 1120-S for the current year;
  • Attached to a late-filed initial Form 1120-S; or
  • Filed as a standalone document submitted directly to the designated IRS Service Center where the corporation files its returns.

Comparison Table: S Election Timing & Relief Options

A late Form 2553 and a late annual Form 1120-S are separate issues. Reasonable-cause election relief does not itself waive the annual return’s filing penalty. For a 2025 Form 1120-S due in 2026, the ordinary per-shareholder late-return amount is $255 per month or part of a month, up to twelve months, with additional tax-based penalties if entity-level tax is due. See the 2025 Form 1120-S instructions.