After you file Form 2553: CP261 and follow-up
Reviewed by the Nexus by State research team against IRS forms, instructions and the Internal Revenue Code (sources below).
The service center notifies the corporation whether the election is accepted and when it takes effect, generally within 60 days. Acceptance comes as notice CP261.
CP261: accepted
CP261 says the IRS accepted the S corporation election. Keep it in the corporation’s permanent records. From the effective date, file Form 1120-S each year with a Schedule K-1 for every shareholder, and file all employment tax returns. If the address changes, file Form 8822-B.
A different effective date on CP261
If the effective date on the notice is later than the date you entered on line E, the IRS treated your Form 2553 as not timely for that date. The IRS points to late-election relief under Rev. Proc. 2013-30.
CP264: denied
CP264 means the IRS did not accept the Form 2553. The notice explains why. There is no waiting period: you can file a new, complete and timely Form 2553 with all required statements at any time.
Timeline and follow-up
- Expect a determination generally within 60 days of filing.
- If you checked box Q1 (fiscal year by business purpose), you get a ruling letter approving or denying the tax year, and acceptance generally takes an additional 90 days.
- Not notified within 2 months of the date you faxed or mailed the form (5 months with box Q1)? Call 1-800-829-4933.
Keep proof of filing
Acceptable proof if the IRS questions whether you filed: a timely postmarked certified or registered mail receipt (or the equivalent from a designated private delivery service), Form 2553 with an accepted stamp or a stamped IRS received date, or an IRS letter stating the election was accepted.
Until the election takes effect
Do not file Form 1120-S for any tax year before the year the election takes effect. If the entity now files Form 1120 or another return, keep filing it until then.