Hello, this is my first time using this site.
My client has asked me to catch up/clean up his S-corp tax filings from the inception of his business in 2012. He thought the 2553 was filed but it wasn't. Also, he had a partner (50/50) but she passed away in March of 2014. He is still within the time frame to request a late S-Corp election but the 2553 will not be signed by the deceased shareholder. Additionally, she had no will or executor to sign consent for her.

I guess my question is three-fold:

1. Is there a way that my client will still be able to request a valid S-Corp election with one of the shareholders being deceased?
2. If so, who would sign for her, if anyone?
3. If not, would my client have to file as a C-Corp for 2012, 2013 and 2014? (The last year for his company is 2014, before the death of his partner)

Thank you very much for your help!

P.S. I have tried contacting the IRS three times with NO luck getting someone to talk to.

1. Is there a way that my client will still be able to request a valid S-Corp election with one of the shareholders being deceased?=======>>>>>> I guess it depends; the decedent's probate estate remains an eligible shareholder for the duration of the administration of the estate without the need for any specific action by the executor. However, this treatment is only extended to a qualified revocable trust, generally referred to as a living trust, for two years after death.



2. If so, who would sign for her, if anyone?========>>>>> an executor / administrator of the shareholder's estate may consent to the election on behalf of the decedent; when a person acts for another person in a fiduciary capacity, the fiduciary assumes the powers, rights, and privileges of that person provided written notice has been made to the District Director. Consistent with this power, the executor, even though appointed after the date of the election, may consent to the election on behalf of the decedent and the decedent's estate. If the election is to be made effective for the following taxable year, no consent need be filed by any shareholder who is not a shareholder on the date of the election.



3. If not, would my client have to file as a C-Corp for 2012, 2013 and 2014? (The last year for his company is 2014, before the death of his partner)========>>>>>>>correct. If Form 2553 is filed within the first two months and 15 days of the corp’s tax year,2014, the election is effective for the entire tax year of 2014; otherwise, the corp will continue to be taxed as a C corp until the corp meets the election date If the S corp misses the dates , the IRS considers the filing late and denies the application for the year in question. However, The IRS will provide relief for late elections if a corp can show that reasonable causes led to its failure to file on time. To qualify for this relief, a corp must meet all the qualifications to be an S corp except the on-time filing and must not have filed a tax return for the tax year in question. It must include Form 2553 with its 1120S tax return filing. In addition, shareholders whose tax returns will be affected by the S corp's filings cannot have filed their personal tax returns or cannot have filed one that is inconsistent with the S corp's filing. In general, the IRS is fairly lenient when it comes to granting relief and allowing a corp to elect S corp status in the year intended. Reasonable causes vary, and the IRS does not publish a list. However, tax journals and court documents show that certain reasonable causes are nearly always allowed. Two acceptable reasonable causes are ;the company’s president, chief executive officer or similar responsible person neglected to file the election, or the corp’s tax professional or accountant neglected to do so; the corp or its shareholders either did not know of the need to file an election or didn't know they needed to file the election in advance.All shareholders must consent to the election and sign Form 2553..form 2553must be filed before the 16th day of the 3rd month of the corporation's tax year For a newly formed corporation, Before the 15th day of the 2nd month of a tax year lasting 2-1/2 months or less, At any time during the tax year before the tax year the election is to take effect, At any time after these deadlines if the corporation follows special rules for making a late S-corp election.

For example, say, A Corp just incorporated on July 1st. A has until October 16th to file Form 2553 for the S-Corp election to be valid for the company's first year of operation.
D Corp just incorporated on November 1st. Since the first tax year will be less than 2-1/2 months (just Novemer 1-December 31), D has until Jan 15th of the following year to file Form 2553 for the S-Corp election to be valid for the company's first year of operation.
j Corp just incorporated on February 14th. It did not file Form 2553, however it wishes to be taxed as an S-Corp beginning with its first year of operation. j will need to follow carefully the special rules for making a late election for S-Corp status. G Corp has been incorporated for several years and is currently taxed as a C-corp. G can file Form 2553 by December 31st if the company wishes to convert to an S-corp for the following year.

Thank you Wnhough!!
I forgot to mention that the deceased SH did not have a will, living trust or executor of her estate. Since the 2553 would be filed after the one SH has passed, then only the remaining SH would need to consent, right? (The company would meet all of the requirements to make a late election)
Thanks again!!!

Right. However,Shareholders who acquire stock after the S election is filed need not consent to the S election. For example say, Unless the deceased s/h or owner/EE has specifically provided for such in her will, the surviving shareholder does not receive the deceased owner's shares in the corp. The surviving relatives generally become the new business owners and if there are other owner, the heir becomes a co-owner with him/her.

Thanks again for your help! This site is awesome!!