The IRS 2553 form is a document used by small businesses to elect S corporation status for tax purposes. By filing this form, a corporation or LLC can choose to be taxed as an S corporation, potentially leading to tax savings and financial benefits. Ready to streamline your tax obligations? Click the button below to start filling out your form.
Business entities in the United States face a critical decision early in their lifecycle that can significantly affect both their tax burdens and their operational flexibility. Among the myriad forms and regulatory requirements they must navigate, the IRS 2553 form stands out as a pivotal document for many small businesses. This form, officially titled "Election by a Small Business Corporation," serves as the gateway for companies choosing to be treated as S corporations for tax purposes. Opting for S corporation status can offer considerable tax advantages, such as allowing income, losses, deductions, and credits to pass through to shareholders, thus avoiding double taxation on corporate income. However, the election is subject to strict eligibility criteria and deadlines that businesses must meticulously adhere to. Additionally, the decision to file IRS 2553 must be informed by a comprehensive understanding of the implications for payroll, shareholder reporting, and overall tax strategy. The complexity of the process underscores the importance of timely and accurate filing, making the IRS 2553 form a crucial document for eligible entities aiming to leverage the specific benefits that S corporation status confers.
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,
Colorado, Florida, Hawaii, Idaho, Iowa, Kansas,
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)
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
L
Stock owned or
percentage of ownership
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)
Page 3
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.
Page 4
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
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
*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.
Once the decision to change a company's tax status has been reached, the IRS 2553 form becomes a critical document in facilitating this transition. While the process might seem daunting at first, taking the appropriate steps in a logical order can simplify the completion of this form. Each section of the form is designed to collect specific information about the company, its election, and its shareholders. Following a clear set of instructions can help ensure the accuracy and timeliness of the submission, ultimately allowing the company to benefit from its new tax status sooner. It is important for companies to thoroughly review the form after completion, to check for any inaccuracies or missing information that could delay processing.
After submitting the form, companies should anticipate a response from the IRS within 60 days, confirming whether the election has been approved or if further information is necessary. It’s important during this period to maintain detailed records and be prepared to supply any additional information that the IRS may require. Successfully completing the IRS 2553 form marks a significant step towards realizing the benefits of a new tax status, underscoring the importance of meticulous attention to each step of the process.
What is the IRS 2553 form?
Form 2553 is a document filed with the Internal Revenue Service (IRS) by eligible corporations to elect S corporation status for tax purposes. Filing this form allows corporations to pass corporate income, losses, deductions, and credits directly to their shareholders for federal tax purposes.
Who needs to file Form 2553?
Small business corporations with 100 shareholders or fewer may need to file Form 2553 if they wish to be treated as an S corporation. All shareholders must agree to the election.
What are the benefits of electing S corporation status?
Election as an S corporation can help businesses avoid double taxation on corporate income, as profits are taxed only at the shareholder level. Additionally, S corporations can benefit from certain tax deductions and credits.
When should the IRS 2553 form be filed?
To elect S corporation status effective for the current tax year, Form 2553 must be filed no more than two months and 15 days after the beginning of the tax year the election is to take effect. For a new company, it should be filed at any time during the tax year preceding the tax year it is to take effect.
What information is required on Form 2553?
Form 2553 requires information about the corporation, including name, address, date of incorporation, and state of incorporation. Information on the tax year, shareholder consent statements, and a selection of an S corporation election effective date are also needed.
How do I file Form 2553?
Form 2553 can be filed electronically or by mailing it to the IRS. It's crucial to check the IRS instructions for the current address or electronic filing options as these may change. Ensure the form is duly signed and dated by all shareholders.
What happens if Form 2553 is filed late?
If filed late, the IRS may still accept the election for S corporation status retroactively if there is reasonable cause for the delay. Detailed explanations must accompany the late filing, explaining the reason for the delay.
Can Form 2553 be revoked after filing?
Yes, S corporation status can be revoked with the consent of shareholders holding more than 50% of the shares. The revocation must be filed with the IRS, specifying the effective date of the revocation.
Are there any restrictions on who can be a shareholder in an S corporation?
Yes, shareholders in an S corporation are limited to individuals, certain trusts, and estates. Partnerships, corporations, and non-resident aliens cannot be shareholders in an S corporation.
Where can I find more information or assistance with Form 2553?
More information on Form 2553 and S corporation status can be found on the IRS website. Additionally, tax professionals and attorneys specializing in tax law can provide assistance with filing and questions regarding your specific situation.
Filing the IRS 2553 form, which is essential for electing S Corporation status, requires attention to detail and a thorough understanding of the form's requirements. Unfortunately, individuals often encounter common mistakes that can delay or invalidate their election. Recognizing and avoiding these errors can streamline the process and ensure a smoother transition to S Corporation status.
Failing to obtain all required shareholder signatures: The form requires the signature of every shareholder. Missing even one can result in the rejection of the application. It’s crucial to ensure that all shareholders have signed the form before submission.
Incorrect or incomplete information: Providing inaccurate information about the business, such as the wrong Employer Identification Number (EIN) or incorrect business name, can lead to delays. Double-check all entries for accuracy.
Missing the filing deadline: For the election to be effective for the current tax year, the form must be filed by certain deadlines. Missing these deadlines might delay the election until the next year.
Overlooking state requirements: Some states have their own procedures for electing S Corporation status, separate from the federal process. Neglecting these requirements can result in losing S Corporation status at the state level.
Not using the latest version of the form: The IRS occasionally updates forms. Using an outdated version can result in processing delays or the need to re-submit the form entirely.
By paying close attention to these common mistakes and adhering to the guidelines for completing and submitting IRS 2553, individuals can facilitate a smoother, error-free election process for S Corporation status.
Running a business comes with its share of paperwork, especially when it relates to taxation and corporate structure. For companies electing to be treated as an S corporation under United States tax law, the IRS Form 2553 is just the starting point. Filed by domestic corporations and LLCs electing to be treated as corporations, this form allows the entity to be taxed under Subchapter S, potentially resulting in significant tax advantages. However, electing S corporation status is a process that often requires several other forms and documents, each playing a crucial role in ensuring the company's compliance and optimization of its tax strategy.
While the list may seem daunting, understanding and properly managing these forms and documents is essential for taking full advantage of S corporation status while maintaining compliance with tax laws and corporate regulations. Businesses contemplating the election to S corporation status or those navigating the complexities of corporate tax obligations can benefit from consulting with a tax professional or legal advisor to ensure accuracy and compliance. This proactive approach helps to pave the way for a smoother operational path, allowing business owners to focus more on growth and less on administrative challenges.
IRS Form 8832: Similar to IRS Form 2553, Form 8832 is used by entities to elect their classification for federal tax purposes. While Form 2553 is specifically for S corporation election, Form 8832 offers broader classification options, including partnership and corporation.
IRS Form 1120S: This form is the income tax return for S corporations, which must be filed annually after electing S corporation status with IRS Form 2553. Both documents are crucial for S corporations to comply with IRS regulations and report their income, deductions, and other financial activities.
IRS Form SS-4: Used to apply for an Employer Identification Number (EIN), Form SS-4 is essential for businesses before filing Form 2553. The EIN is required on Form 2553 and serves as a unique identifier for the entity with the IRS.
IRS Form 1065: This form is used by partnerships to report their income, gains, losses, deductions, etc. While Form 2553 is for corporations opting to be taxed as S corporations, Form 1065 is for entities that operate as partnerships, emphasizing the variety of tax classifications available for different business structures.
IRS Form 1120: The U.S. Corporation Income Tax Return is required for C corporations. Before filing Form 2553 to elect S corporation status, these entities would typically file Form 1120, highlighting the shift in tax reporting obligations through the election process.
IRS Form 1040 Schedule C: Sole proprietors use this schedule to report their business income and expenses. Though fundamentally different, it is similar to IRS Form 2553 in that it involves reporting income for tax purposes, specifically for individuals operating as sole proprietors rather than entities electing S corporation status.
IRS Form 2555: Used by U.S. citizens and resident aliens to exclude foreign earned income from their taxable income, Form 2555 is a part of individual income tax filings. Though its purpose is distinct from Form 2553, it similarly alters how income is taxed - in this case, by excluding certain income types.
IRS Form 1041: This form is for the income tax return of estates and trusts, showing the similarity in the need for various entities to report income. Form 2553's purpose is to elect a special taxation status for corporations, while Form 1041 is focused on a different subset of tax filers.
IRS Form 8869: A petition for relief for late S Corporation Election, Form 8869 is utilized in conjunction with Form 2553 when the latter was not filed by the deadline. This relationship shows how certain processes within IRS documentation can be remedied or adjusted under specific conditions.
IRS Form 7004: Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. Similar to Form 2553 in its applicability to business entities, Form 7004 is used to request more time to file the required documents, indicating the flexibility in filing deadlines under certain circumstances.
Filling out the IRS 2553 form, which is crucial for businesses choosing to be treated as an S corporation, requires attention to detail and thoroughness. Follow these guidelines to ensure the process is conducted correctly.
Do:
Don't:
When it comes to the Internal Revenue Service (IRS) Form 2553, Election by a Small Business Corporation, numerous misconceptions can lead to confusion and errors. This document is crucial for small businesses choosing to be taxed under Subchapter S of the Internal Revenue Code, which allows the corporation's income, deductions, and tax credits to pass through to its shareholders. Below are five common misconceptions about IRS Form 2553 and the realities behind them.
Many believe that Form 2553 can be filed by any business at any point. However, eligibility is limited to entities that meet the IRS requirements for an S Corporation. These requirements include having no more than 100 shareholders, having only allowable shareholders (e.g., individuals, certain trusts, and estates but not partnerships or corporations), and having only one class of stock. Additionally, Form 2553 must be filed no more 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.
While electing to be treated as an S Corporation can provide tax advantages, such as avoiding double taxation, it doesn’t guarantee tax savings for all businesses. The effectiveness of an S Corporation election depends on several factors, including the business’s income level, state tax laws, and the business's overall tax situation. Consulting with a tax professional can help determine whether this election makes sense for your business.
Some business owners believe that once they make the S Corporation election by filing Form 2553, the decision is irrevocable. However, an S Corporation can revoke its election at any time by obtaining the consent of shareholders holding more than 50% of the shares of stock (on the day the revocation is made) and filing a statement with the IRS. Additionally, failure to meet the requirements of an S Corporation continuously (e.g., exceeding the allowable number of shareholders) can also result in an involuntary revocation of the S Corporation status.
It’s commonly misunderstood that a federal S Corporation election is automatically recognized in all states. However, some states require a separate state-level S Corporation election, and a few do not recognize the S Corporation election at all, treating the entity as a C Corporation for state tax purposes. It’s important to verify how your state treats S Corporations to ensure compliance and plan for state tax obligations accurately.
Although the election process involves specific eligibility criteria and deadlines, filing Form 2553 itself is not inherently complicated. Many businesses can complete and file the form without legal assistance, especially with guidance from the IRS instructions or a tax professional. However, understanding the implications of the S Corporation election on your business’s tax situation and ensuring compliance with all requirements might benefit from professional advice.
Filling out and using the IRS 2553 form, which is essential for electing S corporation status, requires attention to detail and an understanding of its implications. Below are key takeaways to guide you through the process:
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