IRS Rejected my 1120-S from 2021 - S-Corp Election Issues

This is unfortunately a common issue with entity classification and S-corp elections. The IRS systems don't always properly track these elections, especially when faxed. First, gather all your documentation: the fax confirmation for your Form 2553, proof of the original 1120-S acceptance, your Articles of Incorporation showing you were formed as a corporation (not an LLC), and any correspondence you've received from the IRS. Request a call with the IRS Business Division specifically and ask to speak with a supervisor or someone in the Entity Department. Explain that you have proof the return was originally accepted, and that the entity was formed as a corporation (not an LLC as their letter states). You should also consider filing Form 8832 (Entity Classification Election) along with a resubmitted Form 2553, requesting retroactive relief under Revenue Procedure 2013-30, which allows late S-corp elections in certain circumstances. Include a detailed explanation letter with your documentation. Since the company is now dissolved, this might seem like a hassle, but resolving it properly will prevent potential ongoing issues, including personal tax implications and penalties.

I had a very similar issue last year that was incredibly frustrating. After weeks of getting nowhere with the regular IRS channels, I found this service called taxr.ai (https://taxr.ai) that helped analyze all my documentation and communications with the IRS. Their system spotted inconsistencies in how the IRS was classifying my business versus what my actual filings showed. They helped me prepare a comprehensive package with all the right documentation and exactly what to say when calling the IRS. Within 2 weeks of using their guidance, I had the situation resolved and my correct entity status recognized retroactively without penalties. The best part was uploading all my IRS letters and having their system pinpoint exactly where the disconnect was happening in the IRS records. Saved me countless hours of frustration and probably a few thousand in penalties.

After seeing the recommendation for taxr.ai, I decided to try it despite my initial skepticism. I uploaded my rejection letter, fax confirmation of my 2553 filing, and the conflicting communications I'd received from different IRS representatives. The analysis showed that my issue was caused by a specific IRS processing code that flagged entity mismatches, even though my documentation was correct. They provided a template letter citing the exact IRS revenue procedures that apply to retroactive S-corp relief. I was genuinely surprised how effective their approach was. After submitting the documentation package they helped me prepare, I received confirmation that my S-corp status was recognized for the tax year in question within 3 weeks. The IRS representative actually mentioned that the citation of Revenue Procedure 2013-30 in my letter was what helped get it processed correctly. Definitely saved me from what would have been thousands in incorrect penalties and probably months of back and forth with the IRS.

I'm going to recommend something that literally saved me months of frustration with an almost identical S-corp election issue. After trying for weeks to get through to someone at the IRS who could actually help (and being disconnected multiple times), I found a service called Claimyr (https://claimyr.com). You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an actual agent picks up. I was skeptical, but I was able to get through to the Business Entity department in about 3 hours instead of the days I had been trying on my own. The IRS agent I spoke with was able to look up both my Form 2553 submission and my 1120-S filing and reconcile the conflicting information in their system. Made all the difference in resolving my issue because I finally got to speak with someone who could actually help.

I have to eat my words about Claimyr. After continuing to get nowhere with the IRS for another week after my skeptical comment, I broke down and tried it. Set it up in the morning while working on other things, and about 4 hours later got a call connecting me to an actual IRS agent in the Business Entity department. The agent was able to pull up my file and see both the rejected 1120-S and the Form 2553 that supposedly wasn't on file (turns out it WAS in their system, just not properly linked to my EIN). They initiated a correction to link the S-corp election to my account and provided me with a specific extension to call back if I needed to follow up. I was honestly shocked it worked. Saved me from taking another day off work to sit on hold. The agent even told me they're seeing lots of these S-corp election processing errors from 2021-2022 due to pandemic-related backlogs and systems issues.

Have you considered filing Form 1120 (regular C-corp return) for 2021 instead of fighting the S-corp battle? Since the company is dissolved now, it might be simpler to just file as a C-corp for that one year. My accountant advised this route when we had a similar issue - ended up being less headache than fighting with the IRS over the S election for a company that no longer exists.

Has your accountant suggested requesting relief under Section 9100 for the late election? The IRS has provisions for reasonable cause relief that might apply here, especially since you have evidence you submitted the Form 2553.

I went through something very similar with my S-corp election getting lost in the IRS system. The key breakthrough for me was requesting a complete account transcript that shows ALL forms filed under your EIN. You can request this by calling the Business & Specialty Tax Line at 800-829-4933 and asking specifically for a "Business Master File Account Transcript." This transcript will show if your Form 2553 was actually processed and assigned to your account, even if it's not showing up when agents do basic searches. In my case, the form was processed but had the wrong tax year attached to it, which caused the mismatch. Also, since you have the fax confirmation receipt, file Form 4506 to request a copy of the actual Form 2553 from the IRS files. This proves definitively whether they received and processed it. Given that your company is dissolved, time is critical here. The IRS has specific deadlines for retroactive relief, and you don't want to miss those windows. I'd strongly recommend escalating this to the Taxpayer Advocate Service if the regular channels continue to give you runaround - they have more authority to cut through these systemic processing errors.

I'm dealing with a very similar situation right now - IRS rejected my 2020 S-corp return claiming no Form 2553 on file, even though I have proof of electronic filing through my tax software. What's really frustrating is that they processed my payroll taxes all year as an S-corp, so clearly they knew my election status at some point. One thing I learned from my tax attorney is that you should also request Form 4506-T to get transcripts of ALL returns filed under your EIN for the years in question. Sometimes the IRS processes forms but assigns them to the wrong entity or tax period in their system, which creates these phantom "no record" situations. Also, if you haven't already, document every single phone call with the IRS - date, time, representative name/ID, and exactly what they told you. The inconsistencies in their responses can actually help your case when you escalate. I've gotten three different explanations for the same issue from three different agents, which my attorney says demonstrates systemic processing problems rather than legitimate filing issues. Since your company is dissolved, you might want to consider filing a protective claim while you sort this out to preserve your rights to any refunds or penalty abatements you might be entitled to once the S-corp status is properly recognized.

I've been following this thread with great interest as I'm currently dealing with a similar nightmare scenario. The IRS rejected my 2021 1120-S claiming they have no record of my Form 2553, despite having filed it properly and operating as an S-corp for years. What really caught my attention in this discussion is the combination of approaches mentioned - the systematic documentation requests (Business Master File Account Transcript, Form 4506-T) paired with the newer tools like taxr.ai for analysis and Claimyr for actually getting through to the right IRS department. I'm particularly intrigued by Hattie's point about requesting the complete account transcript. In my case, the IRS has been processing my quarterly employment tax returns as an S-corp for three years, but suddenly claims they have no record of the election for my annual return. This system inconsistency seems to be exactly what these transcripts would reveal. For dissolved entities like yours, I'd also suggest checking if your state has any pending tax issues that might be creating federal complications. In some cases, state-level entity problems can cause the IRS to question or override federal elections. The timeline pressure you're under makes this even more critical. Based on what I've read here, I'd probably pursue multiple approaches simultaneously - file for the transcripts and protective claim while using one of the callback services to get through to the Business Entity department directly. The worst thing would be to let deadlines pass while waiting for one approach to work.

I've been dealing with IRS entity classification issues for years as a tax professional, and this thread has some excellent advice. I want to emphasize a few critical points for your situation: First, the fact that your original 1120-S was accepted is huge evidence in your favor. The IRS has internal controls that should have rejected it immediately if there was truly no S-corp election on file. This acceptance creates what we call "administrative estoppel" - they can't now claim they never recognized your status when they previously processed returns based on that status. Second, since your company is dissolved, you're working against some strict deadlines. The IRS generally allows 3 years and 75 days from the original due date to correct entity elections, but dissolution can complicate this. I'd strongly recommend filing Form 9100 (Application for Extension of Time) immediately while you gather your documentation. This preserves your rights to retroactive relief even if the standard deadlines have passed. Third, beyond the excellent suggestions about transcripts and callback services, consider requesting a copy of your complete IRS file using the Freedom of Information Act (FOIA). Sometimes documents exist in the system but aren't showing up in standard searches. A FOIA request forces them to do a comprehensive search. The combination approach mentioned by others is spot-on - use the systematic documentation requests to build your case while using callback services to get to the right people who can actually resolve it. Time is your enemy here, so parallel processing is essential.