2553 - Late Filing

[Gretel]

Attorney didn't file but is filing form 2553 today. Client wants to get K-1 for 1040.

Do I have to wait for IRS approval before I can file the S-Corp. return?

[Unregistered]

Do not Wait..

No, just file S corp (Hope you took extension!). Get K-1.

[Gretel]

Thanks, couldn't do extension because client came in today.

[Unregistered]

Thanks, couldn't do extension because client came in today.

There will be penalty for late issuing of K-1. Thinking again you should wait as IRS may not approve 2553 under late rev procedures as you did not file timely!
Then you may need to amend return.
May be wait and let's see what other people have to say.

[Matt Sova]

No penalty

I have never seen the IRS issue a penalty for late K-1 filing for an S-Corp so I don't think you have to worry about that. If the 2553 is filed properly under Rev Proc 2003-43 you should not have a problem with IRS approval. I would go ahead and complete the return as an S-Corp and the 1040 as well.

[Unregistered]

Disagree

I have never seen the IRS issue a penalty for late K-1 filing for an S-Corp so I don't think you have to worry about that. If the 2553 is filed properly under Rev Proc 2003-43 you should not have a problem with IRS approval. I would go ahead and complete the return as an S-Corp and the 1040 as well.

You have never seen BUT that but law is there. I hope they do not charge penalty but one must explain to client the RIGHT law. IRS may not accept late filing if return 1120S was not filed TIMELY including extension

I would not file 1040. I would take extension on 1040. By that time you would know the result.

[JON]

2003-43

I agree with Matt. On the 1120S put to 2003-43 at the top, assuming you have already filed the 2553. If the 1120S owes a tax there may be a penalty. I have never seen a shareholder have a penalty-as long as it is included on a timely filed 1040 for the shareholder.

[Unregistered]

See TTB 19-4

[Donanita]

C Corp to S Corp

I filed in June 05 to change a C Corp to a S Corp and put 2003-43 on top of the form.IRS denied the change for 2005 but allowed the change in 2006.

[Matt Sova]

More to it than that

Donanita:

There is more to it than just that. You write "Filed Pursuant to Rev Proc 2003-43 on the top of the 2553.

You also attach a statement explaining why it is late. I always use the "I didn't know what I was doing and I have not been able to seek professional help until recently, blah blah blah."

Did have one instance where the IRS put in 1/1 of the upcoming year. Got POA and contacted the practitioner hotline and cleared it up. They put in the info incorrectly.

[Donanita]

[QUOTE=Matt Sova]Donanita:

There is more to it than just that. You write "Filed Pursuant to Rev Proc 2003-43 on the top of the 2553.

You also attach a statement explaining why it is late. I always use the "I didn't know what I was doing and I have not been able to seek professional help until recently, blah blah blah."

Matt
I did all of this and IRS still didn't change until 01-01 of this yr

[Snaggletooth]

Don't File K-1

It's been my experience that if a 2553 is late, the IRS will (more often than not) reject subchapter S status for the year in question, but allow it for the succeeding fiscal year.

If you gyrate an S return, issue K-1s, and go forward on the affected personal returns, and IRS rejects your subchapter S status, then you really have a mess to clean up.

[Gretel]

Thanks everyone. Turned out to be an interesting thread. I will wait until IRS mail is back.

[Matt Sova]

S Status

I have only had the IRS reject one of them, and I have done quite a few. Even the one that got rejected I was able to get it corrected and in place for the correct tax year.

[Armando Beaujolais]

The IRS has issued several rev procs over the past few years that have the goal of allowing S corporation late elections when the corps were intending to be S corps and the only problem was "Did anybody remember to file the 2553?"

As a previous post said, look at 19-4 of TTB. There are several rev procs depending on circumstances.

I'd file as an S corp. Rev proc 97-48 for example will only provide relief if all parties have filed as if they're S corps.

The IRS wants to avoid allowing late elections for tax planning purposes, but wants to give S status to everybody who doesn't qualify solely because the form was not filed.