Small business corporations that intend to elect “Subchapter S” status for the 2014 tax year still have time to submit the appropriate paperwork to the IRS. A corporation may make an S election effective retroactively to the first day of the taxable year if it is made on or before the 15th day of the third month of that taxable year.
The S election is made on IRS Form 2553. All persons who are shareholders on the day the election is made — and, in the case of a retroactive election, anyone who was a shareholder at any time during the taxable year before the day of the election — must consent to the election. Once made, an S election stays in effect for all future tax years until it is terminated or revoked.
Note: A C corporation that converts to an S corporation may encounter special tax issues related to built-in gains, passive income, and LIFO inventories. We can provide details.
Original content provided by: Client Line Newsletter