S Corp 2253 Filing Issue

Hi all,

New to the forum here, been looking around and seems like a lot of sharp people with tax knowledge so wanted to ask what they should do in this situation..

I have a sole member LLC that I just treated as a pass through entity the past few years. I just filed 2253 to elect to be taxed as an S corp for 2018 via Fax midnight 03/14/2018, so they should have received it 03/15/2018 which is the last day I could send it for the election to be valid for this upcoming 2018 year.

Since it takes up to 60 days to hear back if it was accepted or not, that puts me @ May 15 which is after the due dates (April 30) of the first quarter's state (Maryland) unemployment tax/wage reporting and federal Form 941 submission. I have to register an account for unemployment with the state to do this and begin paying myself a salary with distributions now if it takes effect 2018.

What am I supposed to do in this situation? Assume I am taxed as a disregarded entity and then when its accepted just file for quarters 2, 3, 4? Pay late fees and file quarter 1 as though I was an s corp all along since Jan 1 2018? Lean forward now assuming I am an s corp, but if the IRS does not accept, that seems like a huge problem since I would have filed these 1st quarter forms and paid myself a salary by the time I hear back..?

I may be missing an important detail which is why I am confused, but this situation must be common since I technically filed before the deadline but wont hear back in time for 1st quarter tax due dates.

Welcome to the forum gdubb85. First, know that I'm not a tax expert and I'm probably not the best person to answer your questions. The people who will be able to give you a good answer aren't always here every day of the week so I thought I'd reply to help keep your thread active.

I would think until you hear from the IRS that they accepted your business as an S-Corp, you should treat it as an LLC. I'm guessing until they let you know you were accepted, they see your business as an LLC so you should too. You can also give them a call. The few times I've called the IRS, the people there have been very nice and helpful, and they, more than anyone, will know what to do in your situation.

Hope that helped a little and give it a day or two until those who know more than me are here to answer.

Are you confident that you have filled out the form correctly and that you meet all of the tests? Or do you have some reason to suspect that your election of s-corp status might not be accepted?

As I read it, filing this form is making an election -- you are declaring that you are choosing to be treated as an s-corp. So long as you know that you meet all of the standards for making the election, I would proceed ahead as an s-corp.... (unless there is something in the instructions that says you have to wait for approval?) Note that I am not an accountant nor a tax lawyer.

Thank you vangogh and tallen for your responses and disclaimers of your background. I have called them and unfortunately the IRS worker basically read the instructions as from a script and clearly had no advice, I might call back to see if I get someone more knowledgeable. I have no reason to doubt that I filled the form out correctly, but the wording of the instruction makes it seem like if the IRS does not think your LLC should be structured as an s corp they can reject it. It seems like there is no partial year treatment based on the date the status is confirmed; I either need to file 2018 as a disregarded entity or an s corp and my main concern is the near-term company operations/filings of 1st quarter forms which depend on the determination.

The IRS can reject it only IF they don't see that your company meets the requirements. If your business clearly does meet the requirements, and you've filled out the form correctly (no ambiguity), then it seems to me to be extremely unlikely that your election would be rejected. First quarter is not quite over yet, and you have time after the end of it before you have to file the 941 (and maybe you could file for an extension?), so you can wait a bit still for confirmation from IRS, but in the meantime I would plan as if you were going to be treated as an s-corp....

I asked a CPA blogger who basically said the same thing, it should go through and if not I can file for late relief and work out whatever issues caused it to be denied.

So unless someone else chimes in thinking this is a bad plan I am comfortable moving forward operating as an S corp and just not pay myself a 1st quarter wage so 1st quarter 941 is not required. My state labor department got back to me saying the same thing; dont make an account and file anything until you know and have paid a wage.