You missed the March 15 S-Corp election deadline and now you're stuck waiting until next year. Or are you? The IRS offers relief provisions that let many Denver business owners make a late S-Corp election and get tax savings retroactively.
Here's how to file a late S-Corp election and what you need to know about IRS relief procedures.
To elect S-Corp status for 2026, you must file Form 2553 by March 15, 2026 (or within 2 months and 15 days of forming your entity). This deadline is firm. Miss it and your S-Corp election doesn't take effect until 2027.
That means you're stuck paying unnecessary self-employment taxes for an entire year, potentially costing you $5,000 to $15,000 or more depending on your profit level. For most Denver business owners, that's a painful mistake.
The good news: the IRS allows late S-Corp elections with "reasonable cause." If you qualify, you can make your election effective retroactively.
Revenue Procedure 2013-30 provides procedures for late S-Corp elections. Under this revenue procedure, you can obtain relief if you intended to elect S-Corp status when you formed your business or by the election deadline, you failed to file Form 2553 on time, and your failure was due to reasonable cause.
The IRS considers several factors "reasonable cause," including advice from a tax professional that you didn't need to file, reasonable belief that the election was properly filed, and failure to meet requirements through inadvertence or mistake rather than intentional disregard.
Our Denver business CPA services help clients prepare late election relief requests that meet IRS standards for reasonable cause.
You can request late election relief within three years and 75 days of the intended effective date. For example, if you wanted S-Corp status to begin January 1, 2023, you have until March 15, 2026 to request relief.
This generous window means many Denver business owners who've been operating as LLCs for several years can retroactively elect S-Corp status and file amended returns to claim refunds of overpaid self-employment taxes.
The process is straightforward. Complete Form 2553 as normal, including all shareholder signatures. Write "FILED PURSUANT TO REV. PROC. 2013-30" at the top of Form 2553. Attach a statement explaining why you're filing late and why the failure was due to reasonable cause. File the package with the IRS service center listed in the Form 2553 instructions (not your regular filing location).
The reasonable cause statement is critical. Don't just say "I forgot." Explain the specific circumstances that caused the late filing. Good reasons include relying on a tax professional who didn't inform you of the election requirement, believing your entity was already treated as an S-Corp, not knowing an election was required until you consulted with a CPA, or experiencing illness, family emergency, or other circumstances that prevented timely filing.
Here's an example reasonable cause statement: "The taxpayer failed to file Form 2553 by the required deadline because they were unaware of the S-Corp election requirement. The taxpayer formed an LLC in January 2025 and began operating their Denver consulting business. They mistakenly believed that their entity would automatically be taxed in the most advantageous manner. In November 2025, the taxpayer consulted with Succentrix Business CPA regarding their tax situation and learned that S-Corp election was available and beneficial. At that time, they immediately took steps to file Form 2553. The failure to file timely was due to inadvertence and lack of knowledge, not willful disregard of IRS rules. The taxpayer has maintained all required corporate formalities and has acted in good faith throughout."
This explanation shows inadvertence rather than intentional avoidance, demonstrates good faith, and explains what prompted the late filing.
Each shareholder must sign Form 2553 and may need to provide their own statement. The statement should indicate that the shareholder intended to elect S-Corp status, agrees with the late election, and has filed or will file all required returns consistent with S-Corp treatment.
For single-member S-Corps, you're the only shareholder so you only need one statement. Multi-member S-Corps need statements from all shareholders.
If you're seeking S-Corp treatment for prior years, you must file amended returns reflecting S-Corp status for all years covered by the relief. For example, if you're filing late election relief for a 2023 effective date, you must file amended 2023, 2024, and 2025 returns treating the entity as an S-Corp.
The amended returns should include Form 1120-S (S-Corp return) for the business, Form 1040X (amended personal return) for each shareholder, and a Schedule SE showing reduced self-employment taxes.
These amended returns must be filed consistent with S-Corp rules, including reasonable salary paid to shareholder-employees. You can't retroactively claim S-Corp status without also meeting the S-Corp reasonable compensation requirement.
Here's where it gets tricky: if you're making a retroactive S-Corp election, you technically should have been running payroll in prior years. But you weren't, because you didn't know you were an S-Corp.
The IRS doesn't expect you to go back and run payroll for prior years. Instead, you calculate what your reasonable salary should have been, report it on your Form 1120-S for those years, and note in your amended returns that payroll was not actually processed but reasonable compensation is being reported.
This creates some messiness because you didn't withhold employment taxes. Technically you owe those taxes, but you also get refunds of self-employment taxes. The IRS usually offsets these amounts and resolves them when processing your amended returns.
Before filing late election relief, calculate whether it's actually worth it. Compare self-employment taxes you paid as an LLC for the retroactive years to employment taxes you would have paid as an S-Corp with a reasonable salary, factor in the cost of preparing amended returns (typically $500 to $1,500 per year), add the time and complexity of dealing with the IRS, and consider whether you'll owe money or get a refund.
In most cases, if you've been operating profitably for multiple years, the self-employment tax savings far exceed the costs of filing late election relief and amending returns. But run the numbers first.
Our tax strategy services include analysis of whether late S-Corp election makes financial sense for your Denver business.
If you don't want to deal with the complexity of retroactive relief, you can simply file Form 2553 now to elect S-Corp status beginning January 1, 2026 (or whenever the next tax year starts). This doesn't require late election relief because you're filing before the deadline for the coming year.
You lose the ability to claim refunds for prior years, but you avoid the amended return hassle. For some Denver business owners, this simpler approach is preferable even though it doesn't recover past overpayments.
The IRS usually approves late election relief requests if they're properly prepared with reasonable cause explanations. But occasionally they deny requests. If that happens, you have options: contact the IRS and provide additional information supporting your reasonable cause, appeal the denial through IRS administrative processes, or simply accept the denial and start with S-Corp status in the current year.
Denials are rare if you have a legitimate reasonable cause explanation. The IRS is generally accommodating with late election relief when taxpayers are acting in good faith.
If you formed your business in 2025 and intended to elect S-Corp status but missed the deadline, you have slightly different relief provisions. You must file Form 2553 with late election relief within 3 years and 75 days of the formation date.
For new businesses, reasonable cause is often easier to establish. "I just formed my business and didn't know about the S-Corp election requirement" is generally accepted as reasonable cause.
Colorado follows federal S-Corp treatment, so if your late election relief is approved for federal purposes, Colorado will recognize it too. You'll need to file amended Colorado returns consistent with your amended federal returns.
Colorado doesn't have separate relief procedures. Just include a copy of your approved federal late election relief with your amended Colorado returns.
Late S-Corp elections involve complexity that most Denver business owners shouldn't handle alone. A CPA can prepare Form 2553 with proper late election relief language, draft a reasonable cause statement that meets IRS standards, calculate reasonable salary for prior years, prepare amended federal and Colorado returns, and coordinate the filing process with the IRS.
The cost for this service typically runs $1,500 to $3,500 depending on how many years you're amending. But if you're recovering $10,000+ in overpaid self-employment taxes, the professional fees are a good investment.
In our experience helping Denver businesses with late S-Corp elections, the approval rate is very high when relief is properly requested. The IRS is accommodating because they understand that tax rules are complex and mistakes happen.
The key is demonstrating reasonable cause rather than willful neglect. If you can show you acted in good faith and made an honest mistake, relief is usually granted.
If you've been operating a profitable Denver business as an LLC and you just learned about S-Corp benefits, don't assume you've permanently missed out. At Succentrix, we help business owners file late election relief and recover years of overpaid self-employment taxes.
We'll review your last three years of tax returns, calculate potential self-employment tax refunds, determine reasonable salary for prior years, prepare Form 2553 with late election relief request, draft reasonable cause statements, prepare amended returns for all affected years, and coordinate the filing and follow-up process with the IRS.
Most clients recover $15,000 to $50,000 in overpaid self-employment taxes through late election relief. That's real money that goes back into your pocket instead of staying with the IRS.
If you think you might benefit from late S-Corp election, reach out to our Denver team for a consultation. We'll evaluate your situation, calculate potential savings, and let you know if filing for late relief makes sense. Don't let a missed deadline cost you thousands of dollars in unnecessary taxes.
