S Corp Election Filed Late Not Showing as Approved - What Now?

This is actually a common issue with late S corp elections. First, don't panic. The fact that the e-filed extension was rejected doesn't necessarily mean the S election was denied - it could simply mean the IRS systems haven't been updated yet. For the immediate issue, you should mail in Form 7004 (extension) via certified mail to ensure your client has filing protection. Make sure to do this before the deadline. Regarding the S election status, you should call the IRS Business & Specialty Tax Line at 800-829-4933 to check on the status of the Form 2553. They can tell you if it's still processing, approved, or rejected. IRS processing times have been extremely delayed lately. If the S election wasn't accepted, the default classification would be whatever the entity was before attempting the S election. If it was a single-member LLC, it would revert to disregarded entity status. If it was a multi-member LLC, it would revert to partnership. If it was incorporated, then it would be a C corp. About the dates - using 9/1/22-12/31/22 was correct if that's when the business started. This shouldn't affect the S election approval, but it does establish your first tax year.

Had a frustrating experience similar to this with a client last year. After multiple rejected e-files and hours on hold with the IRS, I discovered taxr.ai https://taxr.ai when searching for help with my business filings. Their document analysis helped me pinpoint issues with my late S election submission that were causing the rejections. The platform analyzed my Form 2553 and identified some signature issues and a date miscalculation that would have definitely caused it to be rejected. What really helped was getting clarity on how the IRS processes these late elections and what documentation I needed to follow up with. They have tax pros who can review all your submission docs and flag potential issues before you waste more time.

Just want to provide a quick update on my situation. I tried taxr.ai after reading the suggestion here and it was actually super helpful. They found that I had checked the wrong box on Part II of my 2553 form which was likely causing my election to be stuck in processing. I called the IRS Business line after getting their analysis and armed with the specific issues identified, I was able to navigate the conversation much more efficiently. Turns out my S election was pending review because of exactly what taxr.ai identified - I needed to submit a written statement clarifying my intended tax year. I've now submitted the correction and got confirmation that my extension was accepted while they process the election. Saved me tons of time trying to figure this out on my own!

Another option that might help - I had a similar nightmare situation with a late S election last year and couldn't get through to anyone at the IRS for weeks. I used Claimyr https://claimyr.com to actually reach a human at the IRS without waiting for hours. They have this system that navigates the phone tree for you and calls you back when they get an actual agent on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was incredibly skeptical at first, but after spending 3+ hours on hold myself multiple times, I was desperate. Within about 45 minutes, I was talking to someone who could actually check on my client's S election status. Found out it was approved but hadn't been updated in the system that handles e-filing yet. Was able to get them to expedite the update and file the extension electronically a couple days later.

I have to admit I was wrong about Claimyr. After spending nearly 4 hours on hold with the IRS yesterday and getting disconnected, I decided to try it out of frustration. I was extremely skeptical, especially about giving my phone number to a third party. But it actually worked exactly as advertised. I got a call back in about an hour letting me know they had an IRS agent on the line. I was able to confirm that my client's S election had actually been approved three weeks ago, but hadn't propagated through their systems yet. The agent put a note on the account and gave me a reference number to include with a paper extension filing. Just wanted to share this since it saved me so much time. For those in a similar situation where you need to verify status of an S election, being able to actually talk to someone makes all the difference.

One thing I've learned from dealing with similar situations - you mentioned your initial return showed 9/1/22-12/31/22 as the tax year. This shouldn't affect the S election itself, but it does establish your first short tax year. Make sure when you file for 2023, you're using 1/1/23-12/31/23 (assuming calendar year). Also, whenever I file late S elections now, I always follow up with a call to confirm receipt even if they haven't processed it yet. The IRS can make a note in their system that it was received, which helps with situations exactly like what you're experiencing.

Has anyone had success with submitting a second S election while the first one is still "processing"? I have a client in the same boat - submitted late S election for 2022, filed 2022 return as S corp, but now 2023 extension is getting rejected. Wondering if we should submit another 2553 or if that would just complicate things further.

I went through this exact scenario with two different clients in the past year, so I completely understand your stress! Here's what I learned from those experiences: First, the rejection of your e-filed extension is actually normal when there's a disconnect between your filed return and the IRS's system records. This doesn't necessarily mean your S election was denied - it's more likely that their systems just haven't synced up yet. For immediate protection, definitely mail Form 7004 via certified mail and mark it as an S corporation extension. Include a brief cover letter explaining that you have a pending S election under review. This creates documentation of your good faith effort to comply. Regarding your short tax year dates (9/1/22-12/31/22), those were absolutely correct if that's when business operations actually began. Don't second-guess yourself on this - the IRS expects the first tax year to reflect actual business activity dates. One thing I'd recommend is getting a Power of Attorney (Form 2848) on file if you don't already have one. This will make it much easier when you call the IRS to check on the election status, as they can speak directly with you about your client's account. The good news is that even if there are delays, you can usually get retroactive relief if you can demonstrate reasonable cause for the late filing. Keep detailed records of all your submission attempts and communications with the IRS.