Scorp election not yet made. IRS thinks it is a C....so the return was rejected

[Strongsilence-CPA]

Tried to file an extension.

New corporation in 2021. EIN confirm received stating that the return is due April 15.  Therefore, the IRS assumes it will be a C.  But the client has not yet filed 2553 so the IRS doesn't know it will be an S.

Extension request was rejected with the message: "The IRS believes that the entity type of the client does not match the entity type in the electronically filed extension. You must contact the IRS to resolve the error."

Phone call attempted but the IRS is extremely busy.

This situation must be somewhat regular.  I'll file a paper 7004 unless someone has a solution for me.

[sjrcpa · Accepted solution]

Paper is the way to go here.

[IRonMaN]

Did two paper extensions this morning for a couple of folks that either forgot to file their sub S elections or the elections are still sitting in the Mt Everest stack of papers the IRS is trying to process.

[amec]

Try to input that this is the first year filing as an S corporation. If that doesn't work, add a 1 or 2 to the 2553 input screen at the top. I e-filed an extension this way recently with no problem.

[IRonMaN]

But it is a problem for e-filing

[amec]

That's my point. It's not a problem for e-filing.

[TaxGuyBill]

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@Strongsilence-CPA wrote:

Tried to file an extension.

New corporation in 2021. EIN confirm received stating that the return is due April 15. 

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The election is late.  Does it qualify for the late election?  If they applied for an EIN and choose C-corporation, that could indicate that they did not "intend" to be taxed as a S-corporation, which is one of the requirements.

[Strongsilence-CPA]

It qualifies for the late S election.

It is possible she applied to be an C Corp. She didn't save the SS-4 application and so I don't know.

[Strongsilence-CPA]

I thought to try inputting a 1 yesterday but it didn't work.  Anyway, thanks for the idea.

The 2553 won't be allowed to be e-filed because it is after the proper filing period (75 days after 1st day.)

[amec]

I have had no problems e-filing late election S corp returns with the 2553 attached (signed and uploaded in pdf).

There are boxes to check in miscellaneous info - Corporation is electing to be an S corporation beginning with this tax year and Initial return.

Also, did you could try filling in the 2553 info, particularly the Rev.Proc. that you are filing the late S election under.

[Strongsilence-CPA]

Did 1 return and 1 extension this morning. Both are S corporations that have successfully filed in the prior year and going back several years. Both were rejected with the same error -

"...the filing type must match the filing type established with the IRS for the EIN."

I doubt it is fraud because the corporations don't have refunds.

[Strongsilence-CPA]

Thanks. 1 lesson for me is to handle the 2553 from preparation to filing. This client filed it but didn't keep a copy. The importance of saving it didn't occur to him.

[amec]

Well, then the client's form is probably sitting in a pile with the however many millions of mail documents the IRS hasn't opened yet.