Reject Code F7004-905-03 occurs when an S corporation files Form 7004 (Request for Extension), but the IRS does not recognize the entity as an S corporation in their records.
Why This Happens:
The EIN is not associated with an S corporation in the IRS database.
The S corporation election (Form 2553) may not have been filed or accepted.
The IRS has the corporation listed as a C corporation instead of an S corporation.
How to Fix This Rejection:
1. Confirm the S Corporation Election
Ask the corporate officer the following questions:
✔️ Did the corporation revert back to a C corporation?
✔️ Did they receive IRS Notice CP261 (confirmation of S corp election)?
✔️ Did they file Form 2553 for S corp election on time?
If they did not file Form 2553, they must do so before they can file as an S corporation.
If they filed Form 2553 but haven’t received CP261, they should contact the IRS for status.
2. Indicate "Initial Return" If This Is Their First Year as an S Corporation
If this is the first tax year filing as an S corporation, update the extension request:
Go to the Form 7004 menu → Select "Reason if Tax Year Less than 12 Months" → Choose "Initial Return".
This tells the IRS that this is the first year of S corp election.
3. File Form 2553 for Late Election Relief (If Applicable)
If the corporation missed the Form 2553 deadline, they may still qualify for late election relief.
The Form 2553 instructions provide guidance on how to request relief.
4. Consider Paper Filing the Extension
If the electronic extension request is rejected before the filing deadline,
The preparer can submit a paper-filed extension.
Then, file Form 2553 and request late election relief if necessary.
5. If Uncertain, Contact the IRS
If the issue persists, the corporation should contact the IRS directly for clarification.
By ensuring that the S corp election is properly recorded and updating the extension request accordingly, this rejection can be avoided.