3/27/2017 IRSProvidesGuidanceonLateEntityClassificationElections

JournalofAccountancy

IRSProvidesGuidanceonLateEntityClassificationElections
September3,2009

TheIRSonThursdayreleasedRevenueProcedure200941(http://twurl.nl/ax6krg),givingeligibleentitiesguidanceonhowtoobtainreliefwhentheymakealate
entityclassificationelection.Thereliefisavailableforthreeyearsand75daysaftertherequestedeffectivedateoftheeligibleentitysclassificationelection.

Underthechecktheboxregulations,businessesthatarenotclassifiedascorporationscanelectforfederaltaxpurposestobetreatedasanassociationora
partnership,or(ifthebusinesshasasingleowner)itcanelecttobedisregardedasanentityseparatefromitsowner.Thebusinessmakestheelectionbyfiling
Form8832,EntityClassificationElection,withtheIRSServiceCenterdesignatedontheform.Ifitisrequiredtofileafederaltaxorinformationreturnforthetax
yearthattheelectionismade,itmustalsoattachacopyoftheformtoitstaxreturnfortheyearthatitwantstomaketheelection.

Initsnewguidance,theIRSextendsthedateforentitiestomakeaninitialclassificationelectionortochangeaclassificationelection.Tobeeligibleforthe
extendedlateelectionrelief,thebusinessmusthavefailedtoobtainitsdesiredclassificationsolelybecauseitfailedtotimelyfileForm8832andeitherithasnot
filedafederaltaxorinformationreturnforthefirstyearinwhichtheelectionwasintendedbecausetheduedatehasnotpassedoritmusthavefiledallitsrequired
federalreturns(sincethetimeoftheintendedelection)consistentwiththeclassificationitintendedtoobtain.

Tomakealateelectionundertheprovisionsoftherevenueprocedure,aneligibleentitymustfileacompletedForm8832withtheapplicableIRSServiceCenter
withinthreeyearsand75daysoftheeffectivedateoftheelection,alongwithastatementexplainingthereasonforitsfailuretomaketheelectionontime.The
IRSwillnotifytheentityifitisgrantingthelateelectionrelief.

Entitiesthatwanttoobtainlateelectionreliefthroughaletterrulingrequest(becausetheydonotmeettheeligibilityrequirementsintherevenueprocedure)must
includethisrepresentationwiththeletterrulingrequest:

AllrequiredU.S.taxandinformationreturnsoftheentity(or,iftheentitywasnotrequiredtofileanysuchreturnsunderthedesiredclassification,thenall
requiredU.S.taxandinformationreturnsofeachaffectedpersonasdefinedinSection4.02ofRev.Proc.200939)werefiledtimelyorwithin6monthsof
theduedateoftherespectivereturn(excludingextensions)asiftheentityclassificationelectionhadbeenineffectontherequesteddate.NoU.S.taxor
informationreturnswerefiledinconsistentlywiththosedescribedinthepriorsentence.

RevenueProcedure200941iseffectiveSept.28,2009,forrequestspendingwiththeIRSonthatdateandrequestsmadeafterthatdate.

2017AmericanInstituteofCPAsAllRightsReserved

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