IRS Rejecting your S-Corp filing?

There were a little over 4.1 million S-Corp tax returns filed. There are several reasons for a corporation to elect to be treated as an S-Corporation. The primary reasons for electing S-Corporation status revolves around the tax benefits of doing so. One of these benefits is limiting the amount of corporate net income subject to payroll/self-employment taxes.

There are a number of S-Corporation elections that the IRS does not process. Perhaps the election forms were accidentally not filed, or the forms were not filled out correctly, or the forms were lost in the mail. If the IRS receives an S-Corporation tax return but has not accepted an S-Corporation election for the corporation filing the return, the Service will send a notice (LTR3853C) informing the corporation that an S-Corporation election has not been accepted for the entity.

The potential tax consequences of this “non-election” can be great. Fortunately, the IRS provides a process by which it will accept a retroactive S-Corporation election. If you are concerned because you have received an S-Corporation election notice from the IRS, please contact us.