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For many business owners, navigating the intricacies of tax classification represents a critical step in optimizing their company's tax liabilities and benefits. Among the numerous forms and procedures that the Internal Revenue Service (IRS) requires, the IRS 2553 form plays a pivotal role for those electing to have their business taxed as an S corporation. This election allows eligible corporations and entities to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. The benefits of this choice can significantly impact a business's tax obligations, potentially leading to more favorable tax treatment under certain conditions. However, understanding the eligibility requirements, deadlines for filing, and the proper procedures to correctly file this form is essential. The form itself is the gateway for businesses seeking to take advantage of the S corporation tax status, necessitating careful attention to detail and adherence to specific IRS guidelines to ensure compliance and to secure the intended tax benefits without encountering legal pitfalls or unnecessary delays.

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Note: Form 2553 begins on the next page.

Where To File Form 2553 after 6/17/19

If the corporation’s principal business, office,

Use the following address

or agency is located in

or fax number

 

 

Connecticut, Delaware, District of Columbia,

Department of the Treasury

Georgia, Illinois, Indiana, Kentucky, Maine,

Internal Revenue Service

Maryland, Massachusetts, Michigan, New

Kansas City, MO 64999

Hampshire, New Jersey, New York, North Carolina,

 

Ohio, Pennsylvania, Rhode Island, South Carolina,

 

Tennessee, Vermont, Virginia, West Virginia,

Fax # 855-887-7734

Wisconsin

 

 

 

Alabama, Alaska, Arizona, Arkansas, California,

Department of the Treasury

Colorado, Florida, Hawaii, Idaho, Iowa, Kansas,

Internal Revenue Service

Louisiana, Minnesota, Mississippi, Missouri,

Ogden, UT 84201

Montana, Nebraska, Nevada, New Mexico, North

 

Dakota, Oklahoma, Oregon, South Dakota, Texas,

 

Utah, Washington, Wyoming

Fax # 855-214-7520

 

 

Form 2553

(Rev. December 2017)

Department of the Treasury Internal Revenue Service

Election by a Small Business Corporation

(Under section 1362 of the Internal Revenue Code)

(Including a late election filed pursuant to Rev. Proc. 2013-30)

▶You can fax this form to the IRS. See separate instructions.

▶Go to www.irs.gov/Form2553 for instructions and the latest information.

OMB No. 1545-0123

Note: This election to be an S corporation can be accepted only if all the tests are met under Who May Elect in the instructions, all shareholders have signed the consent statement, an officer has signed below, and the exact name and address of the corporation (entity) and other required form information have been provided.

Part I

 

Election Information

 

 

 

 

 

 

Name (see instructions)

A Employer identification number

Type

 

 

 

 

 

 

Number, street, and room or suite no. If a P.O. box, see instructions.

B Date incorporated

 

or

 

 

 

 

 

 

 

 

 

Print

 

 

 

 

 

 

City or town, state or province, country, and ZIP or foreign postal code

C State of incorporation

 

 

 

 

 

 

 

 

 

 

 

D

Check

the applicable box(es) if the corporation (entity), after applying for the EIN shown in A above, changed its

name or

address

EElection is to be effective for tax year beginning (month, day, year) (see instructions) . . . . . . ▶

Caution: A corporation (entity) making the election for its first tax year in existence will usually enter the beginning date of a short tax year that begins on a date other than January 1.

FSelected tax year:

(1) Calendar year

(2) Fiscal year ending (month and day) ▶

(3) 52-53-week year ending with reference to the month of December

(4) 52-53-week year ending with reference to the month of ▶

If box (2) or (4) is checked, complete Part II.

GIf more than 100 shareholders are listed for item J (see page 2), check this box if treating members of a family as one shareholder results in no more than 100 shareholders (see test 2 under Who May Elect in the instructions) ▶

HName and title of officer or legal representative whom the IRS may call for more information

Telephone number of officer or legal representative

IIf this S corporation election is being filed late, I declare I had reasonable cause for not filing Form 2553 timely. If this late election is being made by an entity eligible to elect to be treated as a corporation, I declare I also had reasonable cause for not filing an entity classification election timely and the representations listed in Part IV are true. See below for my explanation of the reasons the election or elections were not made on time and a description of my diligent actions to correct the mistake upon its discovery. See instructions.

 

Under penalties of perjury, I declare that I have examined this election, including accompanying documents, and, to the best of my

Sign knowledge and belief, the election contains all the relevant facts relating to the election, and such facts are true, correct, and complete.

Here

▲Signature of officer

 

 

 

Title

Date

For Paperwork Reduction Act Notice, see separate instructions.

Cat. No. 18629R

Form 2553 (Rev. 12-2017)

Form 2553 (Rev. 12-2017)

Page 2

Name

Employer identification number

Part I Election Information (continued) Note: If you need more rows, use additional copies of page 2.

J

Name and address of each

shareholder or former shareholder required to consent to the election.

(see instructions)

K

Shareholder’s Consent Statement

Under penalties of perjury, I declare that I consent to the election of the above-named corporation (entity) to be an S corporation under section 1362(a) and that I have examined this consent statement, including accompanying documents, and, to the best of my knowledge and belief, the election contains all the relevant facts relating to the election, and such facts are true, correct, and complete. I understand my consent is binding and may not be withdrawn after the corporation (entity) has made a valid election. If seeking relief for a late filed election, I also declare under penalties of perjury that I have reported my income on all affected returns consistent with the S corporation election for the year for which the election should have been filed (see beginning date entered on line E) and for all subsequent years.

Signature

Date

L

Stock owned or

percentage of ownership

(see instructions)

Number of

 

shares or

 

percentage

Date(s)

of ownership

acquired

M

 

Social security

 

number or

N

employer

Shareholder’s

identification

tax year ends

number (see

(month and

instructions)

day)

Form 2553 (Rev. 12-2017)

Form 2553 (Rev. 12-2017)

Page 3

Name

 

Employer identification number

 

 

Part II

Selection of Fiscal Tax Year (see instructions)

 

Note: All corporations using this part must complete item O and item P, Q, or R.

 

O Check the applicable box to indicate whether the corporation is:

 

1.

A new corporation adopting the tax year entered in item F, Part I.

 

2.

An existing corporation retaining the tax year entered in item F, Part I.

 

3.

An existing corporation changing to the tax year entered in item F, Part I.

 

PComplete item P if the corporation is using the automatic approval provisions of Rev. Proc. 2006-46, 2006-45 I.R.B. 859, to request (1) a natural business year (as defined in section 5.07 of Rev. Proc. 2006-46) or (2) a year that satisfies the ownership tax year test (as defined in section 5.08 of Rev. Proc. 2006-46). Check the applicable box below to indicate the representation statement the corporation is making.

1. Natural Business Year ▶

I represent that the corporation is adopting, retaining, or changing to a tax year that qualifies

as its natural business year (as defined in section 5.07 of Rev. Proc. 2006-46) and has attached a statement showing separately for each month the gross receipts for the most recent 47 months. See instructions. I also represent that the corporation is not precluded by section 4.02 of Rev. Proc. 2006-46 from obtaining automatic approval of such adoption, retention, or change in tax year.

2. Ownership Tax Year ▶

I represent that shareholders (as described in section 5.08 of Rev. Proc. 2006-46) holding more

than half of the shares of the stock (as of the first day of the tax year to which the request relates) of the corporation have the same tax year or are concurrently changing to the tax year that the corporation adopts, retains, or changes to per item F, Part I, and that such tax year satisfies the requirement of section 4.01(3) of Rev. Proc. 2006-46. I also represent that the corporation is not precluded by section 4.02 of Rev. Proc. 2006-46 from obtaining automatic approval of such adoption, retention, or change in tax year.

Note: If you do not use item P and the corporation wants a fiscal tax year, complete either item Q or R below. Item Q is used to request a fiscal tax year based on a business purpose and to make a back-up section 444 election. Item R is used to make a regular section 444 election.

QBusiness Purpose—To request a fiscal tax year based on a business purpose, check box Q1. See instructions for details including payment of a user fee. You may also check box Q2 and/or box Q3.

1. Check here ▶ if the fiscal year entered in item F, Part I, is requested under the prior approval provisions of Rev. Proc. 2002-39, 2002-22 I.R.B. 1046. Attach to Form 2553 a statement describing the relevant facts and circumstances and, if applicable, the gross receipts from sales and services necessary to establish a business purpose. See the instructions for details regarding the gross receipts from sales and services. If the IRS proposes to disapprove the requested fiscal year, do you want a conference with the IRS National Office?

Yes

No

2.Check here ▶ to show that the corporation intends to make a back-up section 444 election in the event the corporation’s business purpose request is not approved by the IRS. See instructions for more information.

3.Check here ▶ to show that the corporation agrees to adopt or change to a tax year ending December 31 if necessary for the IRS to accept this election for S corporation status in the event (1) the corporation’s business purpose request is not approved and the corporation makes a back-up section 444 election, but is ultimately not qualified to make a section 444 election, or (2) the corporation’s business purpose request is not approved and the corporation did not make a back-up section 444 election.

RSection 444 Election—To make a section 444 election, check box R1. You may also check box R2.

1.Check here ▶ to show that the corporation will make, if qualified, a section 444 election to have the fiscal tax year shown in item F, Part I. To make the election, you must complete Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, and either attach it to Form 2553 or file it separately.

2.Check here ▶ to show that the corporation agrees to adopt or change to a tax year ending December 31 if necessary for the IRS to accept this election for S corporation status in the event the corporation is ultimately not qualified to make a section 444 election.

Form 2553 (Rev. 12-2017)

Form 2553 (Rev. 12-2017)

Page 4

Name

Employer identification number

Part III Qualified Subchapter S Trust (QSST) Election Under Section 1361(d)(2)* Note: If you are making more than

one QSST election, use additional copies of page 4.

Income beneficiary’s name and address

Social security number

Trust’s name and address

Employer identification number

Date on which stock of the corporation was transferred to the trust (month, day, year) . . . . . . . . ▶

In order for the trust named above to be a QSST and thus a qualifying shareholder of the S corporation for which this Form 2553 is filed, I hereby make the election under section 1361(d)(2). Under penalties of perjury, I certify that the trust meets the definitional requirements of section 1361(d)(3) and that all other information provided in Part III is true, correct, and complete.

Signature of income beneficiary or signature and title of legal representative or other qualified person making the election

 

Date

*Use Part III to make the QSST election only if stock of the corporation has been transferred to the trust on or before the date on which the corporation makes its election to be an S corporation. The QSST election must be made and filed separately if stock of the corporation is transferred to the trust after the date on which the corporation makes the S election.

Part IV Late Corporate Classification Election Representations (see instructions)

If a late entity classification election was intended to be effective on the same date that the S corporation election was intended to be effective, relief for a late S corporation election must also include the following representations.

1The requesting entity is an eligible entity as defined in Regulations section 301.7701-3(a);

2The requesting entity intended to be classified as a corporation as of the effective date of the S corporation status;

3The requesting entity fails to qualify as a corporation solely because Form 8832, Entity Classification Election, was not timely filed under Regulations section 301.7701-3(c)(1)(i), or Form 8832 was not deemed to have been filed under Regulations section 301.7701-3(c)(1)(v)(C);

4The requesting entity fails to qualify as an S corporation on the effective date of the S corporation status solely because the S corporation election was not timely filed pursuant to section 1362(b); and

5a The requesting entity timely filed all required federal tax returns and information returns consistent with its requested classification as an S corporation for all of the years the entity intended to be an S corporation and no inconsistent tax or information returns have been filed by or with respect to the entity during any of the tax years, or

bThe requesting entity has not filed a federal tax or information return for the first year in which the election was intended to be effective because the due date has not passed for that year’s federal tax or information return.

Form 2553 (Rev. 12-2017)

⇩ PDF Form

File Attributes

Fact Name Description
Purpose of the Form The IRS Form 2553 is used by small businesses to elect S corporation status for tax purposes.
Eligibility To be eligible to file Form 2553, the company must meet specific IRS requirements, including being a domestic corporation with allowable shareholders such as individuals, certain trusts, and estates, and having no more than 100 shareholders.
Filing Deadline The form must be filed no later than two months and 15 days after the beginning of the tax year the election is to take effect or at any time during the tax year preceding the tax year it is to take effect.
Governing Laws Federal tax law governs the filing of IRS Form 2553, specifically under the Internal Revenue Code (IRC) Subchapter S.
State-Specific Forms Some states require an additional form to be filed to recognize S corporation status for state tax purposes. These requirements vary by state.
Signatory Requirements All shareholders must consent to the election by signing the form at the time of filing.

How to Fill Out IRS 2553

Filling out the IRS 2553 form is a crucial step for small businesses electing to be taxed as an S corporation. This election can offer tax advantages and affect how profits and losses are distributed among shareholders. It's important to accurately complete and submit the form to ensure compliance with IRS regulations. Here, we provide a straightforward guide to navigate through the form, ensuring all necessary details are correctly furnished and the form is duly submitted within the timeframe stipulated by the IRS.

Once the form is correctly filled out and submitted, the next steps involve waiting for the IRS to process the election. Businesses should keep an eye out for any correspondence from the IRS in case additional information or clarification is needed. Approval of the election allows the company to be taxed as an S corporation for the tax year selected and going forward, assuming all requirements continue to be met.

  1. Begin by gathering the necessary information, including the business name, address, Employer Identification Number (EIN), and the tax year for the election.
  2. Enter the official name of the corporation in Part I, line 1, as registered with the state.
  3. Provide the corporation’s address in line 2, including city, state, and ZIP code.
  4. Fill in the EIN in line 3; it’s a nine-digit number assigned by the IRS to businesses operating in the United States.
  5. Specify the date of incorporation and the state in which the corporation was incorporated (Part I, lines 4 and 5).
  6. Indicate the tax year for which the election is to take effect in Part I, line 6. This can be a specific calendar year or the corporation's fiscal year if different.
  7. In Part II, list all shareholders’ names, addresses, and Social Security or EIN numbers, alongside their consent signatures and dates of signature. All current shareholders must consent to the election.
  8. If representatives are signing on behalf of shareholders, complete the statements in Part III to authorize the election.
  9. Check and complete any applicable sections that might affect the election, such as the Qualified Subchapter S Trust (QSST) election in Part IV, if relevant.
  10. Before submitting, review the form carefully to ensure all information is accurate and complete. Keep a copy for your records.
  11. Finally, mail or fax the completed form to the IRS at the appropriate address or number provided in the form's instructions, depending on the corporation’s location.

Frequently Asked Questions

What is the IRS 2553 form used for?

The IRS 2553 form, commonly referred to as the "Election by a Small Business Corporation," is utilized by small businesses to elect S corporation status for tax purposes. This election allows businesses to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This can potentially result in more favorable tax treatment for the business and its shareholders.

Who is eligible to file IRS Form 2553?

Eligibility to file Form 2553 is primarily extended to domestic corporations and Limited Liability Companies (LLCs) that meet specific Internal Revenue Service (IRS) requirements. These requirements include having:

  • 100 shareholders or fewer,
  • Only individuals, certain trusts, and estates as shareholders, and
  • No nonresident alien shareholders.
  • Only one class of stock.
Additionally, all shareholders must consent to the election.

When should Form 2553 be filed?

Form 2553 should be filed no later than two months and 15 days after the beginning of the tax year the election is to take effect. Alternatively, it can be filed at any time during the tax year prior. Late elections are allowed under specific circumstances and with IRS consent.

How can one file IRS Form 2553?

IRS Form 2553 can be filed either electronically through an authorized electronic filing provider or mailed directly to the IRS. Mailing addresses vary based on the location of the business's principal office or place of business. It's vital to ensure the form is signed by all shareholders or by an officer of the corporation who is authorized to sign the form.

What information is needed to complete Form 2553?

Completing Form 2553 requires detailed information regarding the business and its shareholders, including:

  1. The name and address of the corporation or LLC,
  2. The corporation's Employer Identification Number (EIN),
  3. The tax year for which the election is sought,
  4. Information on each shareholder, including names, addresses, and Social Security numbers or EINs,
  5. The consent of each shareholder, indicated by their signature.

Are there any filing fees for IRS Form 2553?

No, there are no filing fees required by the IRS for submitting Form 2553. This makes the election process more accessible to eligible small businesses seeking S corporation status.

What happens after filing Form 2553?

After Form 2553 is submitted, the IRS will process the election and issue a letter of determination. This letter will confirm whether the S corporation election has been approved or if additional information is needed. It's crucial for businesses to keep this document as part of their permanent records.

Can a business revoke its S corporation status after filing Form 2553?

Yes, a business can revoke its S corporation status after the election has been made. To do so, the corporation must submit a written statement of revocation to the IRS, signed by shareholders holding more than 50% of the shares. Revoking the S corporation status can have significant tax implications, so it's advisable to consult with a tax professional before proceeding.

Common mistakes

Filling out the IRS 2553 form is a crucial step for businesses electing to be treated as an S corporation, yet it's easy to stumble over common mistakes. One frequent error is missing the filing deadline. This form must be filed no more than two months and 15 days after the beginning of the tax year the election is supposed to take effect. Delaying or overlooking this timeframe can result in an unexpected tax status for the entire year.

Another pitfall is providing incorrect or incomplete information about the business entity. The IRS 2553 form requires precise details, including the correct name and Employer Identification Number (EIN) of the corporation. Mistakes here can lead to processing delays or even the rejection of the S corporation election. It's essential to double-check these details against official documents to ensure accuracy.

The issue of obtaining and documenting shareholders' consent often trips up filers. Every shareholder must consent to the election, either on the form itself or separately. Missing signatures can invalidate the entire election process, making it critical to secure and document full shareholder approval before submission.

Failures in adequately describing the business’s tax year can also create complications. The IRS allows certain options for an S corporation's tax year, typically a calendar year or a fiscal year that qualifies under specific IRS rules. Choosing an unqualified tax year without obtaining a revenue ruling or letter ruling approving it can lead to the denial of S corporation status.

Last but not least, another mistake is neglecting to check state requirements. While securing S corporation status at the federal level, some overlook the need to file additional documentation with their state's revenue department. This oversight can result in unexpected state tax liabilities and penalties. It's crucial to research and comply with state-specific requirements to ensure that S corporation status is recognized across all relevant jurisdictions.

Documents used along the form

Filing for an S Corporation status involves more than just submitting IRS Form 2553. Entrepreneurs are often required to complete additional forms and documents to ensure their business meets federal and state requirements. Such documents vary, depending on the specific needs of the business, but there are several that are commonly associated with the process.

  • Articles of Incorporation: This foundational legal document officially forms the corporation in the state. It typically includes the corporation's name, purpose, and the number and type of shares of stock to be issued.
  • IRS Form SS-4: Used to apply for an Employer Identification Number (EIN), which is necessary for tax purposes. This number is needed to open a bank account and file taxes for the business.
  • IRS Form 1120S: The income tax return for an S Corporation, to be filed annually. This form reports the company’s income, losses, deductions, and credits to the IRS.
  • Bylaws: An internal document that outlines the operating rules for the corporation. While not filed with a government entity, bylaws are crucial for governing the corporation's operations.
  • Shareholder Agreement: A contract between the shareholders of the corporation, detailing the rights and obligations of each shareholder. It often includes how shares can be bought and sold, and how decisions will be made.
  • Annual Report: Most states require S Corporations to file an annual report. This document updates the state on any significant changes to the company’s structure or activities.
  • Minutes of Board of Directors Meetings: Although not submitted to a government body, maintaining records of board meetings is a legal requirement, to acknowledge and document decisions made by the corporation’s board.
  • Stock Certificates: Paper evidence of ownership in the corporation, issued to the shareholders. These certificates indicate the number of shares owned by each shareholder.
  • Operating Agreement: Similar to bylaws but for LLCs electing to be treated as S Corporations for tax purposes. This document outlines the LLC's operational and financial decisions.

Together, these forms and documents create a legal framework for the S Corporation, assisting in its governance, tax filing, and operational structure. It's important for business owners to understand the purpose and requirements of each document as they embark on the journey of structuring their business for success.

Similar forms

The IRS 2553 form, known for its role in electing S Corporation status for tax purposes, shares similarities with several other tax documents, each with its unique function yet comparable in their requirements to provide detailed company or personal financial information. One such document is the IRS Form 1120S. This form is used by S corporations to report their annual income, losses, deductions, and credits to the IRS. Like the 2553, the 1120S is specific to S corporations, but it focuses on annual financial reporting rather than the election status itself.

Another document closely related to Form 2553 is the IRS Form 1065. This form is used by partnerships for the annual reporting of their income, deductions, gains, losses, etc. While Form 2553 is used by corporations to elect S corporation status, Form 1065 is used by partnerships to report their financial health. Both require detailed financial information and are integral to the tax filing process for their respective business structures.

IRS Form 8832 is another document with similarities to Form 2553 in that it allows an entity to elect how it will be classified for federal tax purposes, such as a corporation, partnership, or disregarded entity. This choice affects how the entity is taxed. Like the 2553 form, Form 8832 involves a decision that has significant tax implications and offers entities flexibility in their tax treatment.

The IRS Form 2555 is used by individuals to claim the Foreign Earned Income Exclusion. It involves reporting income and providing detailed information about one's residency status. Though it is for individuals and not corporations, like the 2553 form, it relates to electing a specific tax treatment aimed at optimizing tax liability based on specific conditions and statuses.

IRS Form SS-4, the Application for Employer Identification Number (EIN), is necessary for newly established entities that need to be identified by the IRS. Similar to the 2553 form, which is often one of the first steps for new S corporations, the SS-4 form is fundamental for any new business or entity requiring identification and the ability to engage in activities such as opening bank accounts and hiring employees.

Form W-9, Request for Taxpayer Identification Number and Certification, has a connection to Form 2553 in its role in tax identification. While Form 2553 is used by corporations to elect a specific tax status, Form W-9 is used to provide a taxpayer identification number to entities that pay them income, ensuring the proper reporting and taxation of income at the federal level.

The IRS Form 1040, the U.S. Individual Income Tax Return, is primarily for individual taxpayers to report their annual income, but it shares a common goal with Form 2553: to report income for tax purposes. Individuals with ownership in S corporations might need to adjust how they report their share of corporate income on their 1040s after their corporation elects S corporation status with Form 2553, illustrating how individual and corporate tax documents can intersect.

Lastly, the IRS Form 4868, which is the Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, although used by individuals, parallels the concept of Form 2553 in terms of deadlines and timeliness. Filing Form 2553 by a certain date is crucial for the election to be effective for the desired tax year, similarly to how filing Form 4868 by the tax return due date is vital for individuals seeking additional time to file their 1040s.

Dos and Don'ts

When filling out the IRS 2553 form, which is used to elect S corporation status for your corporation, it's important to follow specific guidelines to ensure your form is processed smoothly and accurately. Here are essential do's and don'ts to consider:

Do's

  1. Ensure you're eligible: Before even filling out the form, make sure that your entity qualifies for S corporation status based on IRS criteria, including the number and type of shareholders and stock.
  2. Fill out the form completely: Provide all requested information accurately. Missing information can lead to delays or even rejection of your S corporation election.
  3. Verify shareholder consent: All shareholders must consent to the election; ensure that each shareholder's consent is documented and attached if required.
  4. Adhere to the filing deadlines: Be mindful of the specific deadlines for filing Form 2553. Usually, this form must be filed no more than two months and 15 days after the beginning of the tax year the election is to take effect.
  5. Retain a copy for your records: After submitting Form 2553, keep a copy for your records. This will be useful for future reference and in case of any IRS inquiries.

Don'ts

  • Don't use outdated forms: Always check the IRS website for the most up-to-date version of Form 2553 to avoid using an outdated form that could be rejected.
  • Don't forget state requirements: Though you may file Form 2553 for federal purposes, some states require a separate process to recognize your S corporation status. Ignoring state requirements can lead to unexpected tax liabilities and penalties.
  • Don't provide incorrect information: Providing false or incorrect information can lead to significant penalties and legal trouble. Ensure all provided information is accurate and truthful.
  • Don't miss signing the form: A common mistake is forgetting to have the form signed by all required parties. An unsigned form will not be processed.
  • Don't file without resolving any outstanding tax issues: Ensure that the corporation doesn't have any unresolved tax issues with the IRS before filing, as this could complicate or delay the election process.

Misconceptions

The IRS 2553 form, essential for companies electing to be treated as an S corporation, is often misunderstood. Misconceptions can lead to mistakes in filing, potentially costing businesses time and money. Here are six common myths surrounding this important document.

  • Only LLCs can file Form 2553: This is not true. While Limited Liability Companies (LLCs) can elect to be treated as S corporations by filing Form 2553, corporations can also make this election directly after incorporation. The form is not exclusive to LLCs; it is available to any eligible entity seeking S corporation status.

  • Filing Form 2553 automatically changes tax status: While filing Form 2553 is a necessary step in electing S corporation status, the IRS must accept the election for the change to take effect. Simply submitting the form does not guarantee the election will be approved.

  • There's no deadline for filing Form 2553: Many believe they can file Form 2553 at any time during the year. However, there are specific deadlines. Generally, to be effective for the current tax year, the form must be filed no later than two months and 15 days after the beginning of the tax year when the election is to take effect, or at any time during the tax year preceding the tax year it is to take effect.

  • Any business can elect S corporation status: Not all businesses are eligible for S corporation status. There are specific criteria that a business must meet, such as having only allowable shareholders (which exclude partnerships, corporations, or non-resident aliens), having no more than 100 shareholders, and possessing only one class of stock.

  • State taxes don't apply to S corporations: While it's true that an S corporation's income is typically not taxed at the federal level, state tax requirements vary. Some states do tax S corporations on their income, while others recognize the S corporation status for state tax purposes but might impose an annual tax or fee.

  • You can file Form 2553 electronically: As of the last update, the IRS does not universally allow Form 2553 to be filed electronically. The form must be printed and mailed to the IRS or faxed to the appropriate service center. While some taxpayers might find electronic options through certain tax professionals or software, the general rule is that filing requires a traditional, paper-based submission.

Key takeaways

Filing the IRS 2553 form is a crucial step for certain businesses that decide to be taxed as an S corporation. This tax status can offer benefits like pass-through taxation, meaning the corporation's income, deductions, credits, and losses pass through to the shareholders' individual tax returns. Here are seven key takeaways to consider when filling out and utilizing the IRS 2553 form:

  • Eligibility is Limited: Not all businesses can elect S corporation status. Eligibility is restricted to domestic corporations and LLCs that meet specific requirements, including having 100 or fewer shareholders, having only allowable shareholders (such as individuals, certain trusts, and estates), and having one class of stock.
  • Deadlines Matter: To be treated as an S corporation for the current tax year, the IRS 2553 form must be filed by March 15th of the current tax year for calendar year corporations. For businesses that wish to change their tax status for the next tax year, the form must be filed any time during the preceding tax year or by the 15th day of the 3rd month of the tax year. Late filings can be allowed under certain conditions, but it's best to meet the initial deadlines.
  • Consent is Required: All shareholders must consent to the election. This means every shareholder at the time of the election must sign and date the form, agreeing to the S corporation election.
  • State Regulations Vary: While the 2553 form is a federal document, electing S corporation status can also affect state tax obligations. Some states require a separate state-level S corporation election, while others automatically recognize the federal election or do not recognize S corporation status at all, imposing their own tax consequences.
  • Accurate Information is Critical: The form requires detailed information about the corporation, including the name, address, date of incorporation, and tax year information. Providing inaccurate information can lead to processing delays or rejection of the S corporation election.
  • Professional Advice is Valuable: Given the complexities surrounding the decision to elect S corporation status, consulting with a tax professional or legal advisor familiar with your business's specific circumstances can be invaluable. They can provide tailor-made advice and help navigate the process, minimizing errors and optimizing tax outcomes.
  • Revocation or Termination: Once made, an S corporation election remains in effect until it is revoked or terminates, which can happen if the corporation no longer meets the eligibility requirements. Understanding the conditions under which an election can be revoked or terminated, intentionally or otherwise, is important for maintaining the benefits of S corporation status.
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Aca Registered - Despite rigorous checks, the ACA disclaims responsibility for breeder errors or omissions, underscoring the complexity of genetic documentation.