The IRS 2553 form, known as the Election by a Small Business Corporation, serves a crucial function for businesses opting to be taxed under Subchapter S of the Internal Revenue Code. This designation allows companies to pass corporate income, losses, deductions, and credits directly to their shareholders for federal tax purposes. For those interested in taking advantage of this taxation structure, completing the form accurately is essential. Click the button below to start filling out your form today.
Navigating the waters of the United States tax system can often feel daunting for business owners, particularly when making decisions that can significantly impact their company’s financial future. One crucial choice involves the selection of a tax status that aligns with the business’s goals and operational structure. In this realm, the IRS 2553 form plays a pivotal role for eligible entities choosing to be taxed as S corporations, a decision not made lightly considering its long-term tax implications and eligibility requirements. This form, while seemingly just another piece of paperwork, is the gateway to potential tax benefits, including pass-through taxation, which allows profits and losses to be reported on the owners’ personal tax returns, avoiding the double taxation typically faced by C corporations. However, the process involves stringent timelines and specific conditions that must be met, ranging from the number of shareholders to the type of stock the company can issue. Therefore, understanding the IRS 2553 form's intricacies, including when and how to file, becomes paramount for businesses seeking to capitalize on the advantages of S corporation status without falling into compliance pitfalls.
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 your business decides to elect S corporation status, it is crucial to accurately complete the IRS Form 2553. This form is essential for small corporations that wish to be taxed under Subchapter S of the Internal Revenue Code. The correct completion and timely filing of this form will ensure that your corporation enjoys the benefits associated with an S corporation status, including pass-through taxation. The process might seem complex, but by following these steps, you can complete the form with confidence.
After submitting the form, the next step involves waiting for confirmation from the IRS. They will review your Form 2553 and, if everything is in order, approve your S corporation election. This confirmation process might take several weeks, so it's important to file your form well in advance of any deadlines. Receiving the IRS's approval is a pivotal moment for your corporation, as it marks the beginning of your new tax status. Remember, maintaining compliance with all future IRS regulations and reporting requirements is essential to retain your S corporation benefits.
Form 2553 is a tax form used by small businesses in the United States to elect S corporation status for tax purposes. S corporation status allows companies to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of the S corporation report the income and losses on their personal tax returns and are assessed tax at their individual income tax rates, allowing S corporations to avoid double taxation on the corporate income.
Form 2553 must be filed by any eligible domestic corporation or entity that wants to be treated as an S corporation for tax purposes. To be eligible, a corporation must meet the following requirements:
The deadline to file Form 2553 is 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 prior to the tax year it is to take effect. For a newly formed corporation, this means the form must be filed no later than two months and 15 days after the date of incorporation for the S corporation status to apply for its first tax year. Existing corporations must file by the specified deadline before the beginning of the tax year for which the election is to apply.
To file Form 2553, the corporation or entity must:
It is essential to keep a copy of the filed form and all shareholder consents for the corporation's records.
After Form 2553 is filed, the IRS will review the application to ensure the corporation meets all the eligibility criteria for S corporation status. If approved, the IRS will send a letter confirming the corporation's S election. This letter is an important document and should be kept with the corporation's permanent records. If the IRS rejects the election, the corporation will be notified of the denial and the reasons for it. The corporation may need to address any issues and can request reconsideration if desired.
Filling out the IRS 2553 form, crucial for small businesses electing to be taxed as an S corporation, is a task that requires attention to detail. However, errors can occur, leading to delays or rejections. Here are five common mistakes people make:
Missing the filing deadline: The IRS sets strict deadlines for the election, which generally must be completed within two months and 15 days after the beginning of the tax year the election is to take effect. Failing to meet this deadline can lead to the loss of S corporation status for the year.
Incomplete information: Leaving sections of the form blank or not providing all required identifying information, such as the correct Employer Identification Number (EIN) or all shareholders’ details, can cause the IRS to reject the form.
Incorrect tax year: Mistakes in indicating the correct tax year for which the election is to apply can create processing delays. This can inadvertently affect your tax obligations and potential benefits under the S corporation status.
Failure to obtain all shareholder consents: All shareholders must consent to the election; neglecting to include every shareholder’s consent can invalidate the election attempt. This includes not only securing their signatures but also ensuring that the consent forms are correctly filled out and attached.
Improper tax status: Before electing S corporation status, the business must be eligible. Incorrectly classifying your entity or trying to file the form for ineligible business types, such as certain financial institutions, insurance companies, or international sales corporations, can result in rejection.
Avoiding these pitfalls is key to a successful S corporation election filing. It’s often beneficial to seek guidance or have a professional review the form before submission. This ensures that all the nuances are properly addressed, enhancing the chances of acceptance by the IRS.
When business entities opt to be taxed as an S corporation, filing IRS Form 2553 is a crucial step. However, this form does not stand alone in the process of structuring a business for tax purposes. A variety of other documents play significant roles in complementing the information provided in Form 2553, ensuring the entity complies with both federal and state regulations and secures its status effectively. These documents range from initial incorporation paperwork to specific elections that affect an entity's tax treatment. Understanding these documents is key for any business aiming for an S corporation status.
Together, these documents and forms create a comprehensive framework for a business to successfully navigate its S corporation election. While the IRS Form 2553 is pivotal, its effectiveness and compliance lie within a broader portfolio of filings and internal governance documents. These legal tools ensure the entity not only meets specific tax requirements but is also properly structured and recognized both at the federal and state levels. This multifaceted approach safeguards an entity's operations, allowing it to thrive under the S corporation designation.
IRS Form 1120S: Similar to IRS Form 2553, Form 1120S is integral for S corporations, serving as the income tax return for these entities. Just as Form 2553 is used to elect S corporation status, Form 1120S is used annually thereafter to report the corporation’s income, gains, losses, deductions, credits, etc. They are connected in their use by S corporations for tax reporting and status purposes.
IRS Form 8832: This form, known as the Entity Classification Election form, shares similarities with Form 2553 in the sense that it allows a business to choose its classification for federal tax purposes. While Form 2553 specifically elects S corporation status, Form 8832 provides a broader range of tax classification options, including C corporation or partnership, highlighting its flexibility in entity classification elections.
IRS Form 1065: Form 1065 is the Return of Partnership Income. It is akin to Form 2553 in that it is utilized by entities, specifically partnerships, to report financial activities. Though Form 2553 is about electing a specific tax status, and Form 1065 is about reporting income and losses by partnerships, both are critical for entities to comply with IRS requirements regarding their operational classification and financial activities.
IRS Form SS-4: This document is used to apply for an Employer Identification Number (EIN). The connection to Form 2553 lies in the foundational steps for a business’s official recognition by the IRS. Before a corporation can elect S status using Form 2553, it often needs an EIN, which is obtained through Form SS-4. They are sequential in the early administrative stages for new businesses.
IRS Form 1040-Schedule C: This form is used by sole proprietors to report profits and losses from a business. It is similar to Form 2553 in the context that both involve the reporting of business income and expenses. However, Form 2553 focuses on the election of S corporation status, which can affect how a business is taxed, while Schedule C integrates the business’s outcomes into the individual owner’s tax return.
IRS Form 2555: This form deals with Foreign Earned Income Exclusion. Though seemingly unrelated, it shares a similitude with Form 2553 in its specificity to a particular tax situation. Form 2553 pertains to the election of S corp status, impacting domestic taxation, while Form 2555 focuses on individuals working abroad desiring to exclude a portion of their foreign earnings from U.S taxation. Both forms cater to distinct tax needs and options offered by the IRS.
The IRS 2553 form, crucial for businesses choosing to be taxed as an S corporation, requires careful attention to detail. Here are some dos and don'ts to help ensure your form is filled out correctly:
The IRS 2553 form, crucial for businesses opting to be treated as an S corporation, is surrounded by misunderstandings. Clearing up these misconceptions is essential for accurate compliance and making informed business decisions.
Only large businesses can file Form 2553: A common misconception is that Form 2553 is reserved for large corporations. In reality, this form is available to any business that meets the IRS requirements for S corporation status, regardless of size. Many small businesses can and do take advantage of this status to benefit from its tax implications.
Filing Form 2553 is optional and can be done at any time: While electing S corporation status by filing Form 2553 is indeed optional, it cannot be done "at any time." There are strict deadlines for when the form must be filed. Typically, for an election to be effective for a given tax year, the form must be filed by the 15th day of the 3rd month of the tax year. Missing this deadline can result in waiting until the next tax year for the election to take effect, potentially leading to unwanted tax consequences.
Once you elect S corporation status, it is permanent: Another misconception is the belief that once a business elects to be treated as an S corporation by filing Form 2553, the election is irreversible. In reality, while the decision should not be taken lightly, an S corporation can revoke its status if the company’s circumstances or the owners' objectives change. Revoking or terminating S corporation status involves specific IRS procedures and understanding the associated tax implications is crucial.
Any business can qualify for S corporation status: To qualify for S corporation status, a business must meet several IRS requirements, including restrictions on the number and type of shareholders and types of stocks. Not all businesses will qualify. For instance, certain financial institutions, insurance companies, and international sales corporations are ineligible. Misunderstanding these eligibility requirements can lead to incorrect filings and potential compliance issues.
Filing the IRS 2553 Form, the Election by a Small Business Corporation, is crucial for businesses opting to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. This designation allows businesses to be taxed as pass-through entities, avoiding the double taxation that affects traditional corporations. Understanding the key elements can ensure a smooth process and compliance with IRS requirements.
Filing IRS Form 2553 is a vital step for companies choosing the S-corporation tax status. By focusing on the timeliness of the filing, ensuring all shareholders sign, providing accurate information, specifying the tax year correctly, understanding eligibility, and retaining a copy for records, businesses can navigate the process more comfortably and avoid common pitfalls.
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