Filing Form 8869 for Q sub election - Am I late, and what effective date should I use?

Based on your situation, there are a few things to consider with Form 8869 for your Q sub election. First, the date question: Since your LLC wasn't legally formed until March 25th, you can't make a Q sub election for any date before that. The earliest effective date you can use would be March 25th (the date your LLC was officially formed). As for whether you're late - the IRS generally requires Form 8869 to be filed within 2 months and 15 days from the date you want the Q sub election to be effective. So if you want the March 25th effective date, you should have filed Form 8869 by June 9th (March 25 + 2 months and 15 days). If you've missed that window, you have two options: 1) Apply for late election relief under Rev. Proc. 2013-30, which might allow you to get a retroactive effective date, or 2) Choose a current/future effective date instead.

I went through something similar with my Q sub election last year and had a ton of paperwork confusion. I ended up using taxr.ai (https://taxr.ai) to help sort it all out. I uploaded my formation documents, transaction records from before the official formation, and their system analyzed everything and gave me specific recommendations for my Form 8869 filing, including the right dates to use and explanation letter language for late filing relief. The best part was they explained exactly what I needed to document about those early "pre-formation" transactions. Saved me from a ton of back-and-forth with my accountant who was charging me hourly!

Just wanted to update after trying taxr.ai for my business restructuring. I was super skeptical (as you can see from my previous comment) but it actually delivered really helpful analysis. I uploaded my LLC formation docs and operating history, and it identified exactly what I needed for my Q sub election forms. The document analysis caught that my LLC formation date and my first transaction date had a 40-day gap, which affected what dates I could use for the election. Saved me from a potential mistake that would have caused problems later. Honestly surprised at how precise the recommendations were compared to the general advice I got from my tax guy.

If you're still struggling with the IRS about this (especially if you need late filing relief), I'd recommend Claimyr (https://claimyr.com). I tried for WEEKS to get through to someone at the IRS about my late QSub election. Their callback service got me through to an actual IRS agent in less than 2 hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through the exact relief procedure for my situation. They even confirmed which specific address I needed to send my Form 8869 to (which was different than what I found online). Way better than waiting on hold for 3+ hours like I did the first time.

I'm eating crow on this one. After my skeptical comment, I decided to try Claimyr for my business tax issue since I'd already wasted 4 hours on hold with the IRS over two days. The service actually worked exactly as described. I got a call back in about 90 minutes, and was connected directly to an IRS representative who helped me sort out my Q sub election issues. The agent confirmed I needed to file for late election relief and gave me specific instructions on what supporting documentation to include. Honestly, I'm shocked it worked so well. I've spent countless hours on IRS hold music over the years, so this was a game-changer. Not cheap, but WAY worth it considering the time saved.

Just a quick tip from someone who's been through this - make sure you're documenting those early transactions carefully. For the period before your LLC was formed, there's additional paperwork you should consider beyond just the Form 8869 issue. I would suggest creating a formal document showing the "assignment" of those early activities to the LLC once formed. Talk to your accountant about creating a paper trail showing the business continuity.

Has anyone actually been audited specifically for Q sub timing issues? I made a similar mistake last year (filed about 30 days late) and just went ahead with it without requesting relief. Nothing bad has happened yet, but now I'm getting nervous reading this thread.

Based on your timeline, you're definitely in a tricky spot with the Q sub election timing. Since your LLC was formed on March 25th, that's the earliest possible effective date you can use for Form 8869. The 2 months and 15 days deadline from that date would have been June 9th, so you're likely going to need to request late election relief. For the $15,000 in transactions that happened before March 25th (when the LLC didn't legally exist), those would typically be treated as personal business activities that you'll need to formally assign to the LLC through proper documentation once it was formed. This is separate from your Q sub election issue but equally important for clean record-keeping. I'd strongly recommend requesting late election relief under Rev. Proc. 2013-30 rather than choosing a current effective date. This will allow you to treat the LLC as a Q sub from March 25th forward, which is probably what you intended from the beginning. You'll need to include a reasonable cause statement explaining why you missed the deadline - something like "taxpayer was unaware of the filing deadline" is often accepted for first-time filers. Make sure to include all supporting documentation with your Form 8869, including your LLC formation documents and evidence of the business activities. The IRS is generally reasonable about granting relief for these situations, especially when there's clear business purpose and no tax avoidance motive.

One thing I haven't seen mentioned yet is that you'll also want to make sure your S-Corp is actually eligible to have a QSub before filing Form 8869. Your S-Corp needs to own 100% of the LLC, and the LLC can only have one class of membership interests. Also, the LLC must be a domestic entity and cannot be an ineligible corporation. Since you mentioned this was always your plan, I assume you've structured it correctly, but it's worth double-checking before you go through the effort of requesting late election relief. The IRS won't grant relief if the entity wasn't eligible for QSub status in the first place. Also, just to clarify the tax treatment for those pre-formation transactions - since the LLC didn't exist yet, those $15,000 in transactions would be considered activities of whoever was actually conducting the business (likely you personally). When you transfer those activities to the LLC after formation, you'll need to be careful about the tax implications of that transfer, especially if there are any assets with built-in gains or losses.

This is a complex situation that requires careful attention to both timing and documentation. Given that you operated for nearly 3 months before the LLC was legally formed, you'll definitely need to address the pre-formation period separately from your QSub election timing. For the Form 8869, March 25th (your LLC formation date) is indeed the earliest possible effective date you can request. Since the deadline for that would have been June 9th, you'll need to file for late election relief under Rev. Proc. 2013-30. The good news is that the IRS is generally reasonable about granting relief for first-time filers who can demonstrate reasonable cause. A few critical steps you should take: 1. Prepare a reasonable cause statement explaining why you missed the deadline - unfamiliarity with the requirement is typically acceptable 2. Mark your Form 8869 clearly with "FILED PURSUANT TO REV. PROC. 2013-30" 3. Create formal assignment documentation for those $15,000 in pre-formation transactions 4. Verify your LLC operating agreement doesn't create multiple membership classes (which would disqualify QSub status) The pre-formation activities will need to be properly transferred to the LLC through an assignment agreement, and you'll want to ensure proper basis tracking for when everything eventually consolidates at the S-Corp level. Consider having both your attorney and accountant review the documentation to avoid any issues down the road. Don't let the complexity discourage you - these situations are more common than you might think, and with proper documentation and filing, you should be able to get everything straightened out.

I've been following this discussion and wanted to add a practical perspective from someone who went through a very similar situation last year. The advice about requesting late election relief is spot-on - don't try to work around it with a current effective date because that creates more complexity than it's worth. One thing I'd emphasize is to be very thorough with your documentation package when you submit Form 8869. Include copies of your LLC formation documents, your S-Corp documentation showing it owns 100% of the LLC, and a detailed timeline of events. The IRS processor reviewing your request will appreciate having everything in one place rather than having to ask for additional information. Also, when you're preparing that assignment agreement for the pre-formation activities, make sure it specifically addresses any equipment or assets you purchased during that January-March period. If you bought a computer, office supplies, or other business assets with personal funds during that time, those need to be properly transferred to the LLC with appropriate basis adjustments. The reasonable cause statement doesn't need to be elaborate - I used something simple like "Taxpayer was unaware of the QSub election filing requirement and deadline due to inexperience with entity taxation requirements" and it was accepted without issue. The key is being honest and straightforward rather than trying to craft some complex legal argument. Budget some time for this process - between preparing the documentation, getting everything reviewed, and potentially following up with the IRS, it took me about 2-3 months to get everything finalized. But it's definitely worth doing correctly rather than trying to shortcut it.