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Newly formed S-Corp Effective Start Date Rejected even though filed within 75 days

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Level 1

Hello, 

An accountant set up an S-Corp for me in 7/2019. The IRS rejected the designation for 2019 so the effective start date is 1/1/2020. 

All the paperwork was done within the same 2 week period - formation and IRS paperwork. So I thought the S-Corp election would be accepted because it was done within 75 days of formation? 

Here is what the IRS rejection indicated : 

"We didn't accept your Form 2553 for the requested effective date under the revenue procedure because your request was missing a reasonable cause and/or consistency statements. To qualify, the request for relief must be accompanied by all applicable statements. More information about Rev. Proc. 2013-30 can be obtained at irs.gov/irb/20l3-36_IRB/arl2.html"

My accountant's solution was to re-fax the original paperwork as he thinks it was due to a "clerical error at the IRS". Will that be sufficient? 

Thank you

 

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9 Replies 9
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Level 10

I would never rely on a fax machine to file something that important with IRS.  There was no pandemic a year ago, when you say it was done.  What is the date on the notice you quote?  Sounds like someone might have forgotten to file it until the extension request was due March 15 -- and by then, we all know what was happening at IRS.  

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Level 14

Or the July 1 date threw them off. I've had these rejected before. Wrote back and appealed. Then it was accepted.

Or it was filled out wrong.


ex-AllStar
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Level 1

The IRS notice telling me my effective start date for the S-Corp is dated 2/10/2020. 

My accountant gave me the following pdf files on 7/2/2019

IRS CP575 (Date 7/1/2019 assigning me an EIN)
NYS Online Filing Receipt
Certificate of Incorporation NY
Resolution by Incorporator NY

My accountant tells me they did all of the necessary paperwork at that time. But the pdf files they sent do not inform me when they sent the Form 2553. Should I confirm they actually sent it on time? 

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Level 12

@chaney wrote:

My accountant gave me the following pdf files on 7/2/2019

Certificate of Incorporation NY
Resolution by Incorporator NY


Is your accountant also a lawyer?  An accountant should NOT be doing legal work such as filing legal paperwork for forming and incorporating a business.   You really should consult a business lawyer to see if anything needs to be done or corrected.

Forming a corporation has nothing to do with filing the election to be taxed as a S-corporation.  So yes, you need to ask your accountant when that was filed.  If the accountant did not do that on time, that is the accountant's error and hopefully they can try to correct things by appealing for a late election.

 

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Level 10

@TaxGuyBill "An accountant should NOT be doing legal work such as filing legal paperwork for forming and incorporating a business."

That's true, but you know how people feel about lawyers.  Avoid them at all cost, until you're arrested for a felony.  However, in this case the issue seems to be, did the Form 2553 get filed with IRS?  If you can't trust your accountant to do that, maybe you should ask your chiropractor?   

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Level 12

The IRS responded in response to the 2553. So, it seems it was filed, but not correctly.

@chaney 

Do you realize you are posting on a Tax Preparer forum for using the specific program of ProSeries to prepare the tax filings? This community isn't an IRS Help site nor an accounting guidance forum.

You are the Customer. You paid that person to do this work. Keep badgering them until they get it right, or move on to a new provider.

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Level 10

@qbteachmt "The IRS responded in response to the 2553. So, it seems it was filed, but not correctly."

Yes, but I asked for the date of the IRS response, and so far have not received an answer. 

Of course he's asking in the wrong place, but some exposure to what is going on out there is not going to hurt.  

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Level 1

The IRS notice telling me my effective start date for the S-Corp is dated 2/10/2020. 

Thank you for your assistance. 

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Level 12

"The IRS notice telling me my effective start date for the S-Corp is dated 2/10/2020."

The Notice has a Date on it, that reflects the IRS date of the correspondence. Bob was asking about this date. Not the date of the corporation, but the date of the work you paid someone to do for you.

The issue seems to be that perhaps your accountant did not submit the work timely, in the first place. They sure don't seem to know how to follow up with the requested statements. Resending the same info as first sent, but by fax, is not fulfilling the request to send the missing statements.

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