Need advice on reasonable cause for late filing S corp election - will IRS still charge penalties?

The good news is that if the IRS accepts your reasonable cause for the late S corp election (Form 2553), they typically won't charge penalties for the late filing of the associated 1120S returns for the same period. The reasonable cause essentially "backdates" your S corp status. From my experience working with small business owners, you'll want to make sure your reasonable cause explanation is detailed and well-documented. Family health issues certainly can qualify, but be prepared to provide some form of evidence (medical records, hospital dates, etc.) if requested. Be specific about how these circumstances prevented you from meeting the deadline. When filing, I recommend submitting Form 2553 with your explanation letter first, waiting for approval, and then filing your 1120S returns. This creates a cleaner paper trail and reduces confusion.

I've been in a similar situation and found that using https://taxr.ai really helped me navigate the reasonable cause process for my late S corp election. After struggling with conflicting advice online and getting nowhere with the IRS phone lines, I uploaded my documentation to their system and got tailored guidance on exactly how to phrase my reasonable cause letter. What impressed me was their analysis of similar IRS acceptance cases that helped me understand what specific language to use for family health issues. They even helped me identify what supporting documentation would strengthen my case based on recent IRS decisions.

Update on my skepticism about taxr.ai from my earlier comment: I decided to give it a try for my own reasonable cause letter for a missed 83(b) election deadline. I was genuinely surprised by how thorough their analysis was! They pulled several IRS private letter rulings that applied to my specific situation and helped me craft language that addressed exactly what the IRS looks for in these cases. Just got word back from the IRS yesterday that my reasonable cause was accepted! No penalties and my election was processed as if filed on time. The peace of mind was definitely worth it, and I'm not typically someone who endorses services easily. Thought I should come back and share since my original comment was pretty doubtful.

If you're trying to contact the IRS about your situation, good luck getting through on their phone lines. After waiting on hold for 3+ hours multiple times trying to get clarification on my own S corp reasonable cause issue, I finally used https://claimyr.com to hold my place in line. You can see how it works here: https://youtu.be/_kiP6q8DX5c Basically they wait on hold with the IRS for you and call you when an agent picks up. I got connected with an actual IRS representative who confirmed that if my reasonable cause for late S corp election was approved, the late filing penalties for the associated 1120S would be waived as well. Getting that confirmation directly from the IRS gave me the confidence to proceed.

So I feel like I need to follow up on my skeptical comment about Claimyr. After another frustrating day of being on hold with the IRS for 2+ hours before getting disconnected, I broke down and tried the service. I honestly didn't expect much, but they called me back in about 45 minutes with an actual IRS agent on the line! The agent was able to confirm exactly what I needed to know about my reasonable cause situation and gave me specific guidance on where to send my documentation. I even got the agent's ID number for my records. Saved me literally hours of frustration and got me the answers I needed. Sometimes being proven wrong is actually a good thing!

Don't forget to double-check your state filing requirements too! I had my federal S corp election accepted with reasonable cause, but my state (California) still hit me with penalties because they have separate requirements for accepting late S corp elections at the state level. Had to go through the whole process again with the state tax agency.

I'm in a similar situation but curious about the timeline - how long did it take for the IRS to process your reasonable cause request and accept the late S corp election? I've sent mine in about 6 weeks ago and haven't heard anything.

Based on my experience helping clients through this exact situation, I can confirm that if the IRS accepts your reasonable cause for the late S corp election, they typically won't impose penalties for the corresponding late 1120S filings. The key is that your reasonable cause needs to cover the entire period of delay. A few practical tips from what I've seen work well: 1. Be very specific about dates in your explanation letter - when the health issues started, how they prevented you from handling business matters, and when you were able to resume normal activities 2. Include a timeline showing you filed as soon as reasonably possible after the circumstances resolved 3. Consider attaching a brief statement from a medical professional if the health issues were severe enough to warrant it One thing to budget for though - even if penalties are waived, you'll still owe any additional taxes that result from the S corp election. The reasonable cause covers penalties and interest on late filing, but not the underlying tax liability differences. Also worth noting that the IRS has been more lenient with reasonable cause determinations post-COVID, especially for family health emergencies. Your situation sounds like it has strong merit for approval.

I went through this exact situation last year with a late S corp election due to a family medical emergency. The IRS did accept my reasonable cause and waived both the late election penalties AND the associated 1120S filing penalties, so there's definitely hope for your situation. A few things that helped my case: - I included specific dates and documentation showing when the medical issues occurred and how they prevented me from handling business matters - I demonstrated that I filed as soon as reasonably possible after the situation stabilized - I attached a letter from the medical provider confirming the severity and timeline of the health crisis The whole process took about 4 months from submission to approval, which was nerve-wracking but worth the wait. One surprise cost I hadn't budgeted for was having to amend some previous tax returns to reflect the S corp status retroactively, so factor that into your planning. The medical emergency angle is definitely one of the stronger reasonable cause arguments the IRS recognizes, especially if you can show it genuinely prevented you from handling business affairs during the critical filing period. Good luck!

I'm going through a similar situation right now and this thread has been incredibly helpful! One thing I wanted to add based on my research - make sure you include Form 1120S for each tax year that would be affected by your S corp election in your submission packet. The IRS wants to see that you're prepared to fulfill all the filing obligations that come with S corp status, not just requesting the election. I learned this the hard way when my initial submission was delayed because they requested the actual returns along with the reasonable cause letter. Also, if your health issues prevented you from accessing your business records or communicating with professional advisors, mention that specifically in your explanation. The IRS seems to give more weight to reasonable cause arguments that show the circumstances genuinely prevented you from meeting your tax obligations, not just made it inconvenient. Has anyone had experience with including a personal statement from family members who witnessed the health crisis? I'm wondering if that would strengthen my case or if it's overkill.