How to Handle Form 2553 Late Election After Filing SMLLC Tax Returns

Hey tax folks - I've got a bit of a mess I'm worried about. I have a single-member LLC that I've been operating for a while, and I just submitted a Form 2553 Late Election to convert to S Corp status. Here's my problem though - I already filed last year's tax returns as a SMLLC (Schedule C and everything). Now I'm wondering if this is going to cause issues with the IRS accepting my S Corp election? Will they reject it because I didn't file as an S Corp for the previous year even though I'm trying to do a late election? Anyone dealt with this before? I'm a little stressed about potentially having to amend returns or if they'll just flat out reject my election. Thanks for any guidance!

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20 comments

Emma Bianchi

•8M

You're actually in better shape than you might think! The Form 2553 Late Election is specifically designed for situations like yours. When you file for late S Corp election, you're essentially asking the IRS to treat your business as an S Corp from a specific date forward, even though you missed the original 75-day deadline. The fact that you filed as a SMLLC for the previous year doesn't automatically disqualify you. The IRS understands that businesses sometimes miss election deadlines or change their minds about entity classification. What matters is that you provide a reasonable cause for the late filing and meet the other eligibility requirements for S Corp status. If your late election is approved, you'll generally need to start filing as an S Corp from the effective date you requested on your Form 2553. This could mean you need to amend past returns if the effective date is retroactive, but not necessarily in all cases.

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Emma Bianchi

•8M

The IRS can indeed modify the effective date of your S Corp election. If they feel your requested retroactive date doesn't have sufficient reasonable cause, they might approve your election but with a more current effective date. This is actually quite common and can sometimes be preferable since it eliminates the need to amend previous returns. If they do approve your requested retroactive date, there are typically no penalties specifically for amending your returns due to a late S Corp election. You would simply need to file Form 1120-S for the S Corp instead of continuing to report on Schedule C. However, any additional taxes owed from the amendment could potentially be subject to interest (but rarely penalties if you're acting in good faith).

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Olivia Martinez

•8M

I went through this exact same situation last year with my consulting business. I was filing Schedule C for years but wanted the tax benefits of an S Corp. I found this service called taxr.ai (https://taxr.ai) that really helped me navigate the late election process. They have tax experts who specialize in entity conversions and they helped me draft the perfect reasonable cause statement for my Form 2553. They also analyzed my previous returns to identify any potential issues with the retroactive election. The best part is they helped me understand whether amending my returns would even be beneficial compared to just starting fresh with the S Corp status for the current year. Saved me from potentially making a costly mistake!

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Olivia Martinez

•8M

They actually provided step-by-step guidance on completing the form and crafted a customized reasonable cause statement based on my specific situation. The form itself isn't complicated, but the reasonable cause statement is where most people get rejected. Their review of my previous returns was surprisingly thorough - they identified specific deductions I had taken as a sole proprietor that would be handled differently as an S Corp. The entire process took about 2 weeks from when I uploaded my documents to when I had everything ready to submit to the IRS. The actual IRS processing time was the typical 60-90 days, but taxr.ai's work was much faster than what my previous accountant quoted me. They also provided clear instructions on what to expect from the IRS and how to interpret their response letter when it arrived.

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Charlie Yang

•8M

Just wanted to update on my situation since I actually followed the advice about taxr.ai from the thread. I was hesitant at first (usually am with online services), but ended up giving it a try for my Form 2553 late election. Pretty impressed with the results - they found that in my case, requesting an effective date for the current tax year made more sense than going retroactive. They showed me the tax calculations both ways, and amending would have actually cost me more in self-employment taxes than I would have saved. Their reasonable cause statement was accepted by the IRS without any follow-up questions, which my buddy said is pretty rare. My election was approved last week with the effective date I wanted. Definitely saved me from a headache of amended returns!

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ApolloJackson

•8M

For what it's worth, I had a similar issue last year with my Form 2553 late election. The IRS kept giving me the runaround when I called to check on my application status. After 4 months of getting nowhere, I finally used Claimyr (https://claimyr.com) to actually get through to a real IRS agent. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Basically, they wait on hold with the IRS for you and call you when an actual human picks up. The agent I spoke with was able to see that my application was "pending review" and gave me specific information about what was holding it up (they needed additional documentation about my reasonable cause). Without that call, I think my application would have just been rejected outright. Having a direct conversation with the IRS saved my S Corp election.

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ApolloJackson

•8M

They don't have a special number - they use the same IRS phone lines everyone else uses. The difference is they have an automated system that continuously calls and navigates the phone tree until they get in the queue, then stays on hold so you don't have to. When an agent answers, their system calls you and connects you directly to that IRS agent. It's basically just solving the hold time problem. They're definitely legit. I was skeptical too until I actually got connected with an IRS agent who had my file pulled up and gave me specific information about my case that only someone at the IRS would know. They even told me exactly which form I needed to fax to complete my application. The whole point is that you're the one who actually speaks with the IRS - the service just handles the hold time.

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Rajiv Kumar

•8M

I need to eat some crow here. After my skeptical comment, I decided to try Claimyr myself for an unrelated tax issue (had questions about my Form 2553 effective date options). I was absolutely SHOCKED when I got a call back within about 45 minutes and was suddenly talking to an actual IRS agent. The agent confirmed my late election was still within the reasonable timeframe for acceptance and suggested I include a detailed explanation letter. She even told me that for my specific situation, I should request an effective date that matched my LLC formation date rather than trying to make it retroactive to the previous tax year. This was completely different advice than what my accountant gave me! Really glad I made that call - definitely saved me from a potential rejection or audit trigger.

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Aria Washington

•8M

Just to add another perspective - I did a late S-corp election last year after filing as a SMLLC for 3 years. The key is the "reasonable cause" statement. Mine was accepted because I explained that I didn't understand the tax implications until I hired a new accountant who explained the benefits of an S-corp for my income level. Make sure your reasonable cause is something they'll see as valid - "I didn't know about the deadline" usually doesn't cut it. Something like "I consulted with a tax professional who recommended this structure based on business changes" works better. Good luck!

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Aria Washington

•8M

I requested an effective date of January 1st of the year I was filing in - so not retroactive to previous years, but the beginning of the current tax year. The IRS approved it with that date, which was great because I didn't have to amend any prior year returns. I just started fresh with S-Corp taxation for that current year. I think this approach works best for most people unless there's a compelling reason to go retroactive. The IRS seems more likely to approve elections that don't require them to process amended returns, and it's definitely easier on you administratively. My accountant said that's what he recommends for most clients unless the tax savings from amending would be substantial.

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Emma Bianchi

•8M

Yes, if the IRS approves your S-Corp election with a retroactive date, you are required to amend your previous returns to reflect the correct entity type. Your business would need to file Form 1120-S (the S-Corp return) instead of reporting the income on Schedule C of your personal return. This is because once elected, S-Corp status changes how your business income is taxed - part becomes salary subject to payroll taxes and part becomes distributions not subject to self-employment tax. The tax treatment is fundamentally different, so your previous filings would no longer be accurate under the new classification.

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