The IRS 2553 form, known officially as the "Election by a Small Business Corporation," is a vital document for companies choosing to be treated as an S corporation for tax purposes. This election allows businesses to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. It's a critical step for eligible corporations aiming to benefit from this pass-through taxation status.
When a business chooses to transition its tax status, navigating the procedural landscapes can become a nuanced journey, where the IRS 2553 form plays a pivotal role. Designed to cater to specific types of companies seeking a special tax classification, this document facilitates the election of S corporation status, offering potential tax benefits under certain conditions. By filing this form, a business can shift from being taxed directly to its shareholders, possibly avoiding double taxation on its income—an advantage that can significantly affect its financial health. However, the eligibility criteria, timing, and procedural accuracy demanded by the form's submission process are critical to its acceptance by the Internal Revenue Service. Moreover, the implications of this election extend beyond mere tax considerations, influencing the company's operational, financial, and legal dimensions. Understanding the major aspects of the IRS 2553 form is essential for entities contemplating this strategic decision, highlighting the importance of meticulous preparation, timely filing, and adherence to the nuanced requirements set forth by tax regulations.
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.
Filing IRS Form 2553 is a necessary step for small businesses intending to be treated as an S corporation. This tax designation allows companies to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. The process of filling out the form is straightforward when taken step by step. Accuracy and attentiveness in completing the form ensure that your filing is processed smoothly and without delay. Here are the steps to fill out the IRS 2553 form correctly.
Once completed, review the form for accuracy to avoid potential issues. Submitting the IRS Form 2553 is time-sensitive, usually by the 15th day of the 3rd month of the tax year for which the election is to take effect. Late submissions might be subject to approval based on IRS discretion. Ensuring all steps are carried out thoroughly maximizes the chance of a favorable outcome.
What is an IRS 2553 form?
The IRS 2553 form, officially titled "Election by a Small Business Corporation," is used by small businesses to elect the tax status of S corporation. This status allows income, deductions, losses, and credits to be passed directly to shareholders, avoiding double taxation on corporate income.
Who needs to file Form 2553?
Any corporation or entity eligible to be classified as a corporation, that wants to be taxed as an S corporation, must file Form 2553. The form must be filed with the IRS. It's important for businesses considering this election to meet certain IRS requirements related to shareholders, stock, and profit distribution.
When is the deadline to file Form 2553?
For an election to take effect in the same tax year it is filed, 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. If your business is new, you have 2 months and 15 days from the date of incorporation to file. For an election to take effect for the next tax year, you can file at any time during the tax year before the year you want the election to take effect.
How do I file Form 2553?
Form 2553 can be mailed or faxed to the IRS. The specific mailing address or fax number depends on the state where the corporation's principal business, office, or agency is located. Before sending, double-check that all required information is filled out correctly and that all necessary schedules or attachments are included.
What information is needed to complete Form 2553?
To complete Form 2553, you'll need detailed information about your corporation, including the name, address, Employer Identification Number (EIN), and the tax year for which the S corporation election is sought. Additionally, all shareholders must consent to the election by signing the form, agreeing to the S corporation election terms.
Can I file Form 2553 online?
As of the last update, the IRS does not allow Form 2553 to be filed online. Businesses must submit the form either via mail or fax. Always check the latest IRS guidelines or consult with a tax professional to see if there have been changes to filing procedures.
What happens if I file Form 2553 late?
If you file Form 2553 after the deadline, your S corporation election may not be accepted for the intended tax year, potentially resulting in your business being taxed as a C corporation. However, the IRS may grant relief if you can show that the failure to file on time was due to reasonable cause.
Where can I find help in filling out Form 2553?
Assistance in filling out Form 2553 can be found through various sources including the IRS website, which provides instructions for the form. You might also consider consulting with a tax professional or accountant who is experienced with S corporations. They can provide valuable guidance and ensure that the election process is handled correctly.
One common mistake people make when filling out the IRS 2553 form, required for electing S corporation status, is not verifying their eligibility first. Eligibility criteria include having only allowable shareholders, such as individuals, certain trusts, and estates, and not having more than 100 shareholders. Overlooking these eligibility requirements can lead to the rejection of the S corporation election.
Another oversight involves incorrect or missing Employer Identification Numbers (EINs). The form requires the company’s EIN, and any error in this section could result in processing delays or the form being returned. It is crucial to double-check the EIN for accuracy before submission.
A third error is related to the selection of the tax year. Companies often mistakenly choose a fiscal year end that does not comply with S corporation regulations. Most S corporations are required to adopt a calendar year unless they can establish a valid business purpose for a different fiscal year.
The name and address section of the form is also frequently filled out incorrectly. If the name and address do not match the records of the IRS, it can lead to miscommunication or misplacement of important tax documents. It is important to ensure that all information is current and accurate.
Failure to obtain all required shareholder signatures is another common mistake. Each shareholder must consent to the election; missing signatures can invalidate the election request. This oversight can be especially problematic in corporations with a significant number of shareholders.
Incorrectly completed or entirely omitted election information, such as the specific tax year for which the election is meant to apply, also poses a significant issue. This detail is crucial for the IRS to process the election correctly.
Another area often filled out incorrectly is the “Late Election Relief” section. If filing late, the corporation must provide a reasonable cause for why the election was not made on time. Failing to adequately explain or justify the delay can result in the denial of the election.
Businesses sometimes mistakenly believe they need to file Form 2553 immediately after incorporation. However, there is a window of time after formation when the election can be made. Filing too early or without understanding the effective date of the election can lead to timing issues.
Lastly, overlooking state filing requirements is a mistake that can have financial and operational repercussions. While Form 2553 applies at the federal level, many states have their own process for electing S corporation status or recognizing the federal election. Ignoring state-specific requirements can lead to unexpected tax liabilities and compliance issues.
Filing for an S Corporation status involves more than just the IRS Form 2553. This document is crucial as it requests the Internal Revenue Service (IRS) to tax the business as an S Corporation, enabling the business profits, losses, deductions, and credits to pass through to the shareholders for federal tax purposes. However, several other forms and documents are typically needed to successfully complete this election and ensure compliance with all federal tax obligations. Here's a brief overview of some of these essential forms and documents.
Filing the IRS Form 2553 is a significant step toward structuring your business for tax advantages and operational efficiency. However, it's essential to be aware of and complete any additional paperwork required by the IRS and your state of operation. This ensures your business operates legally and benefits fully from the S Corporation election. Keeping track of all these documents can be challenging, but it's necessary for the long-term success of your business.
The IRS 2553 form, known for its role in electing a corporation to be taxed as an S corporation, shares similarities with several other documents based on their purposes or the processes they facilitate in the realm of taxation and business structure decisions. Here's a look at six other documents that resemble the IRS 2553 form in various aspects:
Each of these documents serves a unique purpose in the broader landscape of tax and legal processes for entities and individuals. Through various elections and filings, they facilitate the strategic management of tax obligations and operational structures within the legal framework.
Filling out the IRS 2553 form, which is the election by a Small Business Corporation (S-corp) form, is a crucial step for businesses that wish to change their tax status. Proper completion of this document ensures they benefit from S-corporation taxation, which can lead to significant tax advantages. To help with this process, here are some essential dos and don'ts:
The IRS 2553 form, often associated with the election by a small business corporation to be treated as an S corporation for tax purposes, is surrounded by various misconceptions. Understanding these misconceptions is crucial for business owners considering this tax status.
Only LLCs Can File Form 2553: A common misunderstanding is that only Limited Liability Companies (LLCs) can file Form 2553. In reality, both LLCs and corporations can elect to be treated as S corporations by the IRS, provided they meet the eligibility criteria.
There's No Deadline for Filing: Another misconception is that there’s no firm deadline to file Form 2553. However, for the election to be effective for the current tax year, the form must be filed within two months and fifteen days after the beginning of the tax year the election is to take effect, or at any time during the preceding tax year.
Filing Form 2553 Automatically Changes Your Business Structure: Filing this form does not change the legal structure of your business; it only changes how your business is taxed. An S corporation remains a corporation under state law, with the special S designation affecting its federal tax treatment.
Any Business Can Elect S Corp Status: Not every business qualifies to elect S corporation status. There are strict requirements, such as the entity must be a domestic corporation or LLC, have only allowable shareholders (which include individuals, certain trusts, and estates but not partnerships, corporations, or non-residential alien shareholders), have no more than 100 shareholders, have one class of stock, and others.
Form 2553 Only Needs to Be Filed Once: While generally true that Form 2553 is a one-time filing, there are situations where a new election must be made. For example, if an S corporation reverts to a C corporation status due to violations of the S corp requirements and later wants to revert back to S status, a new election would be necessary.
Filing the IRS Form 2553 is an essential step for certain businesses that choose to be taxed as an S corporation, which can lead to potential tax benefits. Here is a list of key takeaways for those looking to fill out and utilize this form properly:
Successfully electing to be treated as an S corporation by filing Form 2553 can provide significant tax benefits, but it requires careful attention to eligibility, deadlines, and accuracy of the information provided. Consulting with a tax professional can help ensure that the process goes smoothly and that the business is making the best choice for its situation.
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