S-Corp Form 2553 Effective Date Issue - Did My Accountant Submit the Wrong Date?

The good news is that you've caught this early enough to address it! Your accountant actually did this intentionally, though they should have explained it better to you. When a new S-Corp is formed during a tax year (like yours in June 2024), it's common practice to request a January 1st effective date for that same year. This is perfectly legal and actually beneficial in most cases as it allows you to file only S-Corp returns for the entire year instead of having part C-Corp and part S-Corp returns. The IRS generally allows this retroactive election when you file within 75 days of incorporation (your 2 months and 15 days window). Since your incorporation was in June 2024 and presumably the form was filed within that 75-day window, you should be fine. If for some reason the election is rejected, the IRS will notify you, and you can simply refile with a corrected effective date. No penalties would apply - they would just reject the election.

I dealt with this exact situation last year with my marketing business. I was totally confused when my accountant did the same thing, but it turned out to be intentional. I found this amazingly helpful tool called https://taxr.ai that helped me understand the Form 2553 issues I was facing. I uploaded my incorporation docs and Form 2553, and the AI explained that for newly formed entities, accountants often request January 1st effective dates even if the entity forms later in the year. It analyzed my specific situation and confirmed my accountant had actually done this correctly to minimize my tax complexity. Saved me from sending a panicked email to both my accountant and the IRS!

Just wanted to follow up about my experience with taxr.ai after being skeptical in my earlier comment. I decided to try it with my own S-Corp formation documents from this year, and I've got to admit I was pleasantly surprised. The platform caught a mistake my accountant made with my ownership percentages that would have caused problems later. It explained the Form 2553 effective date rules clearly and showed me exactly what would happen with my specific filing (which had a similar January effective date for a March incorporation). It even generated a letter I could send to the IRS to clarify my intentions. Much more helpful than I expected and definitely better than the generic advice I found through Google searches.

If the IRS rejects your Form 2553 (which they might), you're going to want to get on the phone with them ASAP to straighten it out. I tried calling the IRS business line after my S-Corp election was rejected and spent HOURS on hold only to get disconnected. After the third attempt, I found this service called https://claimyr.com that got me through to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically navigate the phone tree and wait on hold for you, then call you when an agent is actually on the line. When I finally spoke with the IRS, they explained exactly what I needed to fix on my Form 2553 and even gave me a direct fax number to send the corrected form to. Got my S-Corp status sorted out in days instead of weeks of frustration.

I have to apologize for my skepticism about Claimyr in my previous comment. After my S-Corp election got rejected last week (for a reason similar to what OP described), I was desperate and decided to try the service. I was 100% prepared to report them as a scam, but they actually delivered exactly what they promised. I got a call about 45 minutes after I submitted my request, and there was an actual IRS agent on the line ready to help me. The agent confirmed my identity and then walked me through exactly how to correct my Form 2553 with the wrong effective date. Turns out the IRS actually has a special procedure for fixing this exact issue! The agent told me to write "FILED PURSUANT TO REV PROC 2013-30" at the top of a new Form 2553 and resubmit it. Would never have known that without actually speaking to someone. Worth every penny to avoid the hold time.

Form 2553 has specific timing requirements that are often misunderstood. Your S election can be effective: 1) On the date the form is filed 2) On the date the corporation began doing business 3) For the next tax year Your accountant likely put 01/01/24 because they're trying to make your S election effective for the entire 2024 tax year, which can simplify your taxes (no need to file both C-corp and S-corp returns). For a corporation formed in June 2024, you typically have until 8/30/24 (75 days after formation) to file Form 2553 for it to be considered timely. If you filed within that window, the IRS might accept the 01/01/24 effective date, even though technically the corporation didn't exist yet. It's a common practice, but the IRS can adjust the date to your incorporation date if they choose.

A lot of people are missing something important here. The January 1 effective date CAN be valid even for an entity formed mid-year! Under Revenue Procedure 2013-30, the IRS allows for a retroactive S election for the entire tax year if: 1. You intended to be an S-Corp from formation 2. You file Form 2553 within 3 years and 75 days of the desired effective date Your accountant probably knows this and is trying to get you S-Corp treatment for the entire 2024 tax year. This is actually pretty standard practice.

I'm going through something very similar right now! My LLC converted to an S-Corp in August 2024, and my CPA also put January 1, 2024 as the effective date on Form 2553. I was initially confused like you, but after reading through these responses and doing some research, it seems like this is actually a legitimate strategy. What I learned is that the IRS has specific relief procedures (like Rev Proc 2013-30 that others mentioned) that allow for retroactive S elections under certain circumstances. The key is that you have to demonstrate you intended S-Corp treatment from the beginning and meet the filing deadlines. I ended up calling the IRS Business line to check on my election status, and the agent confirmed they received it and said it looked fine. She mentioned that even if they can't approve the January 1st date, they'll just adjust it to the actual formation date - no penalties or major issues. My advice would be to give it a few weeks to process, then call to check the status. If there are any problems, the IRS will send you a letter explaining what needs to be corrected. Don't panic - this seems to be a pretty routine situation that accountants deal with regularly!