Because timing is everything with the IRS.

If you form an LLC and want to be taxed as an S Corp, you have 75 days from when your entity starts (or the beginning of your tax year) to file Form 2553 and make it official.

Miss the window? Your LLC stays a “default” tax setup — taxed as a sole proprietorship (single-member) or partnership (multi-member). That means you pay self-employment tax on every dollar of profit, instead of splitting it between salary (which gets payroll tax) and distributions (which don’t).

In plain English? You pay more — a lot more — if you wait too long.

Yes — and a lot of small business owners do.

The IRS knows people mess this up, so they created Late Election Relief under IRS Rev. Proc. 2013-30.

If you qualify, you can backdate your election as if you filed on time — no giant penalty, no huge hassle if you do it right.

But here’s the catch: they only forgive honest mistakes. You can’t just ignore it for years and hope it magically works later.

A few key things:

✅ You must show you intended to be an S Corp from day one — but missed the form by accident or misunderstanding.

✅ You must still meet all other requirements (like having an eligible entity — LLC or C Corp).

✅ You must be able to prove you didn’t file your tax return yet for that year or that you filed it as if you were an S Corp (which can be messy but fixable).

✅ You must attach a written statement explaining what happened and follow the relief procedure exactly.

Most commonly, you can backdate to January 1 of the current year if you act before filing your return.

Sometimes, you can push it back one or even three years if you filed prior returns as if you were an S Corp and just missed the paperwork — but this is advanced-level and needs careful handling.

The longer you wait, the trickier (and more expensive) the fix can be.

If you blow it off and file as a sole prop or partnership instead, you pay full self-employment tax (15.3% on your net profit) plus your regular income tax.

If you pretend you’re an S Corp but didn’t actually get the election approved, the IRS can deny your treatment — which triggers back taxes, penalties, and possible audits.

So: ignoring it doesn’t “save time” — it usually costs you way more.

Yes — if you do it wrong.

If you file your late election paperwork wrong or your books don’t match your claim, the IRS can deny your request. That means you lose the savings, owe the higher self-employment tax, and might have to refile your return correctly.

This is why I don’t mess around with half-baked DIY on this. I do the statements, fix the books, and handle the back-and-forth if the IRS asks questions.

If your net business profit is $50K or more, the savings can be thousands — every single year.

You’ll pay a reasonable salary (which is subject to payroll tax), but the rest comes out as distributions — no self-employment tax on that portion.

Even with payroll costs and professional help to fix it, most business owners come out ahead by a mile.

You’ll file Form 2553 plus the late relief statement, attach any needed explanations, and sometimes you’ll also refile your business return or adjust your bookkeeping to show salary vs. distributions correctly.

You’ll need:
✅ Clean books (or someone to clean them).
✅ Reasonable salary calculation.
✅ Payroll run (even retroactive sometimes).
✅ All the IRS forms filed exactly right.

When I do this for clients, I handle the whole mess — clean it up, get the forms done, run the numbers, and deal with the IRS if they ask questions later.