Converting my business that began a few years ago to an LLC with s corp taxation (Converting from Sole Proprietor to LLC in April 2016). From what I have read, I must elect S corp taxation with form 2553 by March 15th to be taxed as an S Corp for the 2016 calendar year. If I am correct, do I qualify for late election relief? I have a "reasonable explanation" for not filing timely. The only hiccup with the late relief, I think, is that I may not have "qualified for intended status on day that status was desired (between 1/1/16 and the date I filed my articles because I was just a sole proprietor). I'm not sure if I'm correct with my hiccup assumption. If I am, is there any other way for my business to get s corp taxation for 2016?
You should speak with a tax lawyer and provide some more details. If you filed an election (Form 2553) years ago to be classified as an S-corp, you are still an S-corp unless you revoked or changed the election. If you never elected and are not an S-corp, one would have to evaluate whether you can get automatic late relief for the missed election retroactively via the Revenue Procedures or you would need to obtain a letter ruling from the IRS. I have dealt with both cases in my practice and it is usually possible to get a late retroactive classification, it just depends on the reasons and what the IRS procedures are for obtaining relief.
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You may still be able to make the election for 2016 but the clock is ticking. The valid reasons for exception are somewhat variable based upon the reviewer that look at your matter.
The default tax status for a single-member LLC is a "disregarded entity." This means that the entity is disregarded for tax purposes and the individual owner files the taxes on his personal taxes. Your tax situation would stay the same as it did when you operated as a sole proprietor, but you get the limited liability protection of the company. You can elect to be treated as an S-Corporation, but you may not need to since you can get similar tax treatment under the LLC's default tax status. I suggest you utilize the "Find a lawyer" feature to speak with a tax attorney. Alternatively, a CPA may be able to assist you. I have included some links below to the IRS website and publications regarding LLC taxation for your review.
This information is given for legal education only. It may not work for your specific situation. It is not legal advice, and I am not your lawyer. You have to find your own local lawyer to get legal advice and help with your problem.
If i am reading your question correctly, there are two elections that have to be made; first, you have to elect to have your LLC treated as a C-corporation (which you can only make retroactive for 90 days from the date of the election, unless you apply for administrative relief under Code section 9100). Once your business is recognized as a C-corporation, at that point you would have to file the Form 2553 for S-corporation status. Too many steps here, and it gets a bit complicated. Seek the advice of a tax adviser. You may be best off biting the bullet, filing a Form 8832 Entity classification form to make your "corporate status election" retroactive as far back as it can go, and then file the Form 2553. You may not get all of 2016 without applying for administrative relief (and even then there are no guarantees), but you can still capture most of the year. But once again, please consult with your local tax attorney or adviser.
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