S Corporations

S corporations, corporations whose income is taxed to its shareholders in order to avoid corporate level tax, remain a common form of business entity. The rules to qualify, in spite of recent simplifications, remain complex. But if you slip up on forming an S corporation and miss the deadlines the IRS will give you some flexibility to fix the problem. If a corporation makes the S election after the 15th day of the 3rd month of the tax year it will not be effective. But if the request for relief is filed within 24 months of the due date of the election, then the IRS may forgive the oversight — if the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the IRS. Rev. Proc. 2007-62, 2007-41 IRB 786.