Resolving Inadvertent Terminations of S Status: New Rev Proc 2022-19 Relief, Second Class of Stock, Form 2553 Errors

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A

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Wednesday, February 8, 2023 (in 4 days)

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will review the many ways an S corporation can lose its S status, which requires private letter rulings (PLRs) to correct, and utilizing Revenue Procedure 2022-19 to facilitate corrections. Our panel of seasoned S corporation advisers will walk you through examples of common oversights and applying the relief offered by this new Revenue Procedure.

Description

There are a number of ways an S corporation can jeopardize its Subchapter S status. Admitting an ineligible shareholder (nonresident alien, corporation, ineligible trust…), making disproportionate distributions, and failing to properly elect S status are just a few. With fees for private letter rulings (PLRs) ranging upwards to $38,000, correcting these missteps can prove costly. Fortunately, the IRS recently issued Revenue Procedure 2022-19 which allows S corporations and their shareholders to resolve frequently encountered issues without requesting a PLR.

Rev Proc 2022-19 provides for corrective relief that permits taxpayers to retroactively retain S status when the election was terminated due to "non-identical governing provisions." LLCs electing S status that have operating agreement distribution requirements that do not meet the stringent requirements of proportionate S corporation distributions fall in this category.

There are errors that do not necessarily result in the loss of S status. These include filing returns with an improper year end and administrative dissolutions. S corporation advisers must understand what acts result in a loss of a corporation's status under Subchapter S.

Listen as our panel of flow-through experts explains what events can trigger inadvertent terminations, how to salvage these terminations, and how to remedy other S corporation missteps.

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Outline

  1. Inadvertent terminations: introduction
  2. Acts resulting in termination of S status
  3. Acts that do not result in termination of S status
  4. Revenue Procedure 2022-19
  5. Private letter rulings
  6. Correcting other S status errors
  7. Best practices

Benefits

The panel will cover these and other critical issues:

  • Correcting inadvertent errors made on Form 2553, Election by a Small Business Corporation
  • How provisions in LLC agreements can create a second class of stock when an S election is made
  • Applying Rev Proc 2022-19 when an election was terminated due to "non-identical governing provisions" when an LLC elects S status
  • What acts do and do not result in inadvertent termination of S status

Faculty

Jamison, Robert
Professor Robert W. Jamison, CPA

Professor Emeritus of Accounting
Indiana University

Mr. Jamison is Professor Emeritus of Accounting at Indiana University, Purdue University, Indianapolis (IUPUI). His...  |  Read More

Walsh, Kevin J.
Kevin J. Walsh, CPA, CGMA

Director/Vice-President
Walsh, Kelliher & Sharp, CPAs

Mr. Walsh special interest is in advising the owners of closely-held businesses. This interest has led to experience...  |  Read More

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