Late S-Corp Election? Here’s How to Fix It and Still Save on Taxes

If you missed the deadline to elect S-Corporation status for your business, do not panic, you still may qualify to make a “late election” and capture tax savings as if you had elected on time. But you need to move quickly and follow the rules precisely. 

Here’s what you need to know, what steps to take, and how Aureus Advisory Partners can help you turn a missed filing into a strategic win. 

1. Why the S-Corp election matters 

Choosing to be taxed as an S-Corporation gives business owners two major advantages: 

• Profits pass through to the owner’s individual return, avoiding double taxation at the corporate level. 

• Only W-2 wages paid to the owner-employee are subject to payroll taxes; remaining profits can be distributions, reducing self-employment tax. 

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That structure often leads to thousands in savings for S-Corp owners when set up properly. 

2. When the “timely” election deadline is 

In general: 

• If your business is already operating and you want S-Corp status effective for the coming tax year, you must file Form 2553 by the 15th day of the 3rd month of that tax year (for calendar-year entities that is March 15).  

• For a newly formed entity, the deadline is 75 days from the formation date or before the 15th day of the 3rd month of the first tax year, whichever comes first.  

  
  

Miss the deadline and you won’t automatically have S-Corp status for that year, but you may qualify for relief. 

3. What is late-election relief? 

Late election relief allows a business that missed the timely filing deadline to have its S-Corp election treated as if it were made on time, provided certain requirements are met. The primary guidance is Rev. Proc. 2013‑30.  

Key points: 

• The entity must have intended to be taxed as an S-Corp as of the effective date.  

• The only reason it failed to qualify as an S-Corp must be the late filing of Form 2553. 

• The entity and all shareholders must have reported their income as if the S-Corp election were in effect for the year the election was intended and for any subsequent years.  

• Typically the election must be filed within 3 years and 75 days of the intended effective date.  

• In some cases the deadline may be extended beyond 3 years and 75 days if additional criteria are met.  

4. Why it’s often worth doing 

Fixing a late S-Corp election can unlock meaningful tax savings: 

• Shifting to S-Corp treatment often reduces self-employment/ payroll taxes on owner earnings.  

• Enables eligibility for the 20% Qualified Business Income (QBI) deduction for pass-through entities, which may offer additional tax savings. 

• Allows the business to keep losses, deductions and tax attributes aligned properly from the intended status date. 

  
  

In short: if you are profitable and missed the deadline, this move can significantly improve your tax position. 

5. Step-by-step: How to file a late S-Corp election 

Here’s your action checklist: 

1. Confirm your business is eligible for S-Corp status (100 or fewer shareholders, only one class of stock, eligible shareholders, etc.). 

2. Gather documentation showing you intended S-Corp status as of your original effective date (meeting minutes, emails, tax advisor memos). 

3. Confirm you and all shareholders reported income consistent with S-Corp treatment for the year in question and subsequent years. 

4. Complete Form 2553. At the top margin write: “FILED PURSUANT TO REV. PROC. 2013-30.”  

5. Attach a statement explaining your reasonable cause for missing the deadline and what you did once you discovered the error.  

6. File the Form 2553 with the correct IRS Service Center (or attach it to the first Form 1120-S for the year including the effective date if required). (IRS) 

7. Make sure to file any overdue 1120-S returns, consistently treating the business as an S-Corp from the intended date onward. 

8. Retain all documents showing shareholder consent and consistent income treatment. 

6. Common mistakes to avoid 

• Filing Form 2553 without shareholder signatures or missing one class of stock requirement.  

• Failing to report income consistent with S-Corp status for the year the election was intended — this disqualifies relief.  

• Waiting past the 3 years and 75 days window without meeting the exception tests.  

• Using a late election as a substitute for payroll planning. Even after approval you must pay reasonable salary and comply as an S-Corp going forward. 

• Treating this as an emergency-only fix instead of building ongoing tax strategy. 

7. When you might not qualify and what to do 

If your business fails the eligibility test or did not report income consistent with S-Corp status, you may have to request relief via a Private Letter Ruling (PLR) and pay a fee.  

In that case: 

• You still file Form 2553 and request PLR, including explanation and user fee. 

• Expect longer processing and less certainty. 

• Consider alternative entity or tax strategies if S-Corp status is not viable. 

8. How Aureus Advisory Partners can help 

At Aureus Advisory Partners we specialize in structure optimization for business owners.

Here’s how we support your late S-Corp election and ongoing strategy: 

• We evaluate your eligibility for late election relief and guide you through documentation and filings. 

• We calculate what your reasonable salary should be and help you implement payroll systems (via our trusted platforms like Gusto or QuickBooks Payroll). 

• We identify additional tax moves (retirement plans, deductions, entity restructuring) that amplify the benefit. 

• We monitor compliance every year to ensure you maintain S-Corp status and maximize tax efficiency. 

Schedule a strategy session today to see whether you qualify for late S-Corp election relief and how we can unlock savings. 

Final Takeaway 

Missing the S-Corp election deadline is not the end of the story, it’s often a second chance. Provided you meet the eligibility criteria and act quickly, late election relief under Rev.

Proc. 2013-30 can effectively rewind your tax status and unlock significant savings. The key is documentation, consistent reporting, and a proactive payroll strategy. 

You built your business. Make sure your structure reflects what you deserve. 

Ready to Take Action? 

If you believe your business is eligible for a late S-Corp election and you want to capture the tax benefits, schedule a consult at aureusadv.com. Let’s fix your structure and build your strategy for what comes next.