LLC Late S Election

[rnb054]

Have been corresponding with the IRS regarding late S Election. LLC formed 5/12/2014, no 2553 filed. Client filed Form 7004 Extension to file as S Corporation electronically and was accepted by IRS. 2014 Form 1120S filed timely on 4/13/2015 and accepted by IRS. Form 2553 was included with tax return with late election language Rev Proc 213-30.

The 2015 Form 1120S filed timely on 2/16/2016 and accepted by IRS.

Client now received Notice from Ogden accepting S-Election beginning with the 2015 tax year. Letter states that client does not qualify for any relief. My understanding is that late election relief is available to the client as long as no more than three years and 75 days have passed.

Other than private letter ruling, does client have any other options? Any suggestions would be welcome.

Thank you

[TaxGuyBill]

Are you saying they applied for late S-status in April of 2015, and now, over a year later, they are finally getting a response?

The late relief applies if there was "reasonable cause" for the late filing. What was the "reasonable cause" that was entered on the 2553?

[Roland Slugg]

When I read Rev Proc 2013-30 (not 213-30), the following requirement contained in the Rev Proc made no sense to me:

The entity has reasonable cause for its failure to make the election timely

The entire purpose of the Rev Proc seems to be to enable entities to get more or less "automatic" approval of and relief for late elections. I would speculate that the reason most S elections are late is because, "We forgot," or, "We didn't know about the time requirements," or "We didn't get around to it," and none of these lame excuses would, IMO, constitute a "valid" reason. If that is true, then the whole point of Rev Proc 2013-30 would pretty much be rendered useless.

Assuming the entity met all the other requirements spelled out in Rev Proc 2013-30 and did, in fact, attach a properly completed and signed F-2553 to its tax return, it seems to me the relief should be granted. My suggestion is that a well-written letter be drafted, checked for correctness and accuracy (including reference to the correct Rev Proc) and mailed to the IRS "campus" that has authority to grant the relief.