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

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.

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

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

Learning Objectives

After completing this course, you will be able to:

• Identify non-identical governing provisions as referenced in Rev Proc 2022-19
• Determine specific acts that will result in termination of Subchapter S status
• Decide when Rev Proc 2013-30 should be used to correct errors
• Ascertain which specific missteps require a PLR to correct

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).