How Do I File a Late or Retroactive S Corp Election?
Filing for S Corporation (S-Corp) status can be greatly beneficial in tax savings for small business owners as it provides pass-through taxation, along with self-employment tax savings. But what happens if you miss the deadline to elect S-Corp status? The good news is that the IRS allows late or retroactive elections of S-Corp status in some circumstances, but the process is pretty complex for a layman.
If you're a small business in Houston and want to make a late S-Corp election, this article will help you understand requirements, risks, and how a trusted Houston CPA would help ensure everything is handled correctly.
What Is an S-Corp Election?
An S-Corp is a tax status that allows business income to "pass through" to the owners’ personal tax returns, avoiding the double taxation typically associated with C corporations. To elect S-Corp status, you must file IRS Form 2553 within 75 days of the start of the tax year you want the election to be effective.
If you miss this window, you may still qualify for a late or retroactive election, but only if certain conditions are met.
Why You Might Miss the Election Deadline
Missing the S-Corp election deadline is more common than you might think. Some typical reasons include:
Lack of awareness about the election deadline
Miscommunication between business partners or with a tax consultant
Filing errors or administrative oversights
Incorrect assumption that forming an LLC or corporation automatically elects S-Corp status
If you're in this situation, you’re not alone, and you still have options.
Does the IRS Offer Late Election Relief?
The IRS offers relief for late S-Corp elections under Revenue Procedure 2013-30. To qualify for this relief, your business must meet all of the following:
It intended to be treated as an S-Corp as of the desired effective date.
It has reasonable cause for failing to file Form 2553 on time.
It has not filed a tax return inconsistent with S-Corp status.
All shareholders have reported income consistent with S-Corp treatment.
If you meet these criteria, you can file Form 2553 along with a statement explaining your reasonable cause for the delay.
Steps to File a Late or Retroactive S-Corp Election
Here’s how to file for late S-Corp status:
1. Consult with a CPA
Start by talking to a qualified professional. A small business CPA in Houston, such as those at Skyline Financial Management, can evaluate your eligibility and help prepare the correct documentation.
2. Prepare Form 2553
This form includes:
Business name and EIN
Intended effective date for S-Corp election
Signatures from all shareholders
Explanation of late filing under Revenue Procedure 2013-30
3. Attach Reasonable Cause Statement
This is a written explanation of why your election was late. For example, you might state you were unaware of the deadline or relied on faulty advice from a previous accountant.
4. File the Form
Mail or fax Form 2553 to the IRS center designated for Texas-based entities. Your CPA will confirm the correct IRS mailing address or fax number.
What Happens If the IRS Rejects Your Late Election?
The IRS may deny your late S-Corp election if:
You fail to meet all criteria under Revenue Procedure 2013-30
You don’t submit the proper documentation or reasonable cause statement
Your tax filings are inconsistent with S-Corp treatment
In such cases, you may be liable for back taxes, interest, and penalties. That’s why working with an experienced tax consultant in Houston is critical to protect your business.
How Skyline Financial Management Can Help
At Skyline Financial Management, we specialize in expert S-Corp tax prep services in Houston, TX, including late and retroactive elections. Our licensed CPA, Zahra, works directly with small business owners to ensure the filing is compliant, well-documented, and aligns with IRS expectations.
Here’s how we support you:
Evaluate eligibility for late S-Corp election
Prepare and file IRS Form 2553 with complete documentation
Ensure all shareholder agreements and reporting are aligned
Amend prior-year tax filings if necessary
Offer proactive business tax filing support for future years
We understand the challenges small business owners face, especially when trying to balance operations with ever-changing tax rules. Our goal is to make the process stress-free and compliant from start to finish.
Common Mistakes to Avoid
When attempting a retroactive S-Corp election, here are a few pitfalls to steer clear of:
Filing Form 2553 without a reasonable cause statement
Forgetting to get all shareholders to sign and approve
Submitting the wrong tax year or election date
Filing inconsistent tax returns (e.g., using C-Corp forms like 1120 instead of 1120-S)
Avoid these errors by partnering with a Houston CPA who understands the nuances of S-Corp tax law and the Texas business environment.
Other Tax Considerations for Late S-Corp Filers
Filing a late election can trigger a review of your past tax returns. You may need to amend previous filings or reconcile past accounting records. This is especially important if:
You’ve issued payroll under the wrong classification
You’ve claimed deductions or credits as a sole proprietor or C-Corp
You’re dealing with back taxes in Houston
Getting these areas cleaned up now can save your business from future IRS scrutiny.
Don’t Let a Missed Deadline Derail Your Tax Strategy
Missing your initial S-Corp election deadline isn’t the end of the road. With the right guidance, it’s entirely possible to file a successful late or retroactive election and still reap the benefits of S-Corp status.
If you’re a small business owner navigating this process, don’t go it alone. Partner with a trusted CPA in Houston, Texas, who specializes in business tax filing, S-Corp strategies, and IRS communication.
Skyline Financial Management offers personalized support backed by real expertise, no call centers, no cookie-cutter advice. Just one-on-one guidance that keeps your business tax-efficient and fully compliant.
Need help with your S-Corp election or back taxes? Contact Skyline Financial Management today to schedule a consultation with a trusted Houston CPA.
