For those calendar year C corporations looking to elect S corporation status for Year 2001 don't look now but if you haven't already filed your election, you missed the deadline. However, although March 15th was the deadline for electing corporations for Year 2001, the IRS provides some relief measures for late filers in Revenue Procedure 97-40.

In order for a calendar year C corporation to be treated as an S corporation beginning in tax year 2001, an election of S Corporation status must have been made on or before the 15th day of the 3rd month of the tax year (March 15, 2001). The election should have been made on Form 2553, Election by a Small Business Corporation, and filed with the Internal Revenue Service Center where the corporation files its corporate return.

In past years, if your calendar year corporation didn't make its S corporation election in a timely manner, the IRS did not have the authority to grant a waiver and allow the late-filed election. Your corporation would have been treated as a regular (that is, a subchapter C) corporation for the year. The only course of action would have been to request a private letter ruling to allow the election.

Revenue Procedure 97-40 provides some much-needed relief for corporations and shareholders plagued by a late-filed S election. This procedure allows the IRS to choose to treat a late S election as timely filed if it determines there was reasonable cause for such failure. "Reasonable cause" in this case is simply that the only reason the S corporation election is not valid is because it wasn't filed on time.

Is your corporation eligible? A corporation is eligible for relief if it meets the following requirements:

What's the procedure for requesting relief? Within 6 months of the original due date for the S corporation election (in this case, by September 15, 2001), your corporation must file a completed Form 2553, signed by an officer of the corporation and all persons who were shareholders at any time during the period from the first day of the taxable year for which the election is to be effective through the day the election is filed. The Form 2553 must state at the top of the document "FILED PURSUANT TO REV. PROC. 97-40". A statement explaining the reason for the failure to file a timely S corporation election must accompany the form. If the IRS determines there was reasonable cause for the failure to timely file the S election, it will notify the corporation of its determination.