Article Map
The IRS Form 2553 is a crucial document for small business owners who wish to elect S corporation status, a designation that can offer significant tax benefits. By filing this form, businesses can avoid double taxation, allowing profits to pass through directly to shareholders’ personal tax returns. Timing is essential; the form must be submitted within a specific period after the beginning of the tax year for the election to take effect. Additionally, eligibility requirements must be met, including limits on the number of shareholders and the types of stock issued. Understanding the nuances of this form can help streamline the tax process and enhance financial efficiency for many entrepreneurs. Careful attention to detail is necessary when completing the form, as any errors could lead to delays or complications in achieving the desired tax status.
Key takeaways
Filling out the IRS 2553 form is essential for small businesses looking to elect S Corporation status. Here are some key takeaways to consider:
- Eligibility Requirements: Ensure that your business meets the eligibility criteria to elect S Corporation status. This includes being a domestic corporation, having no more than 100 shareholders, and having only allowable shareholders.
- Filing Deadline: Submit the form within a specific timeframe. The IRS requires that the form be filed by the 15th day of the third month after the beginning of the tax year for which the election is to take effect.
- Shareholder Consent: All shareholders must consent to the S Corporation election. This consent is typically indicated by their signatures on the form.
- Impact on Taxes: Understand the tax implications of electing S Corporation status. This election can help avoid double taxation on corporate income, as profits and losses pass through to shareholders' personal tax returns.
Check out More Documents
Waiver of Lien to Date Chicago Title Pdf - It protects the financial interests of the contractor while safeguarding the owner's assets.
Do I Need to File a Florida State Tax Return - Tax issues can escalate; the DR 835 helps in getting professional aid sooner.
To simplify your hiring process and ensure accuracy in employment history, it can be beneficial to utilize an Employment Verification Form, which you can find at Top Document Templates. This form will help you confirm essential details about prospective employees, facilitating a smoother recruitment experience.
Youth Baseball Player Evaluation Form - Overall scores can reflect a player's adaptability in various positions.
Documents used along the form
When filing Form IRS 2553 to elect S Corporation status, several other forms and documents may be necessary to ensure compliance with tax regulations and to facilitate proper record-keeping. Below is a list of commonly used forms and documents that often accompany the IRS 2553.
- Form 1120S: This is the annual tax return for an S Corporation. It reports the income, deductions, and credits of the corporation and is essential for tax purposes.
- Schedule K-1 (Form 1120S): Each shareholder receives this form, which details their share of the corporation's income, deductions, and credits. It is crucial for individual tax reporting.
- Form SS-4: This form is used to apply for an Employer Identification Number (EIN). An EIN is necessary for tax administration and is required for the S Corporation to operate legally.
- Form 941: This is the Employer's Quarterly Federal Tax Return. It reports income taxes, Social Security tax, or Medicare tax withheld from employee's paychecks and is required for payroll tax compliance.
- State Tax Forms: Depending on the state, additional forms may be required for state tax purposes. These forms can include state income tax returns or specific S Corporation election forms.
Understanding these accompanying documents is essential for a smooth filing process and to maintain compliance with federal and state tax laws. Ensure that all necessary forms are completed accurately and submitted on time to avoid potential issues.
Dos and Don'ts
When filling out the IRS Form 2553, it's important to follow certain guidelines to ensure accuracy and compliance. Here’s a list of things you should and shouldn’t do:
- Do read the instructions carefully before starting.
- Do make sure all shareholders sign the form.
- Do check that you meet the eligibility requirements for S Corporation status.
- Do file the form on time to avoid penalties.
- Do keep a copy of the completed form for your records.
- Don't leave any required fields blank.
- Don't forget to include the date of incorporation.
- Don't submit the form without verifying all information is accurate.
- Don't overlook the deadline for filing, which is typically 75 days after the start of the tax year.
Common mistakes
When filling out the IRS Form 2553, which is used to elect S Corporation status, many people make common mistakes that can lead to delays or even rejection of their application. Understanding these pitfalls can help ensure a smoother process.
One frequent error is failing to meet the filing deadline. The IRS requires that Form 2553 be submitted within 75 days of the beginning of the tax year in which the election is to take effect. Missing this deadline can result in the loss of S Corporation status for that year.
Another mistake involves incorrect information about the business. Applicants sometimes provide inaccurate names, addresses, or Employer Identification Numbers (EINs). This information must match IRS records precisely. Any discrepancies can cause significant issues.
Many individuals also overlook the requirement for shareholder consent. All shareholders must sign the form to indicate their agreement to the S Corporation election. If any signatures are missing, the form may be deemed incomplete.
Some filers fail to check the eligibility criteria for S Corporations. Not all businesses qualify. For instance, there are restrictions on the number of shareholders and the types of stock that can be issued. Ignoring these rules can lead to automatic disqualification.
Another common mistake is not providing the correct tax year. The form must specify the tax year the business intends to use. If this is not clearly indicated, it can create confusion and delay the approval process.
Many people also neglect to include all necessary attachments. For example, if the business has more than one owner, a list of shareholders should accompany the form. Missing attachments can slow down processing times.
Incorrectly calculating the number of shareholders is another frequent error. The IRS limits S Corporations to 100 shareholders. If the number exceeds this limit, the election will not be approved.
Some applicants fail to double-check their math when determining the ownership percentages. Each shareholder’s ownership must be accurately reflected. Errors in these calculations can lead to complications in the election process.
Finally, people sometimes forget to keep a copy of the completed form for their records. This can be problematic if there are any questions or issues later on. Having a copy ensures that you can refer back to what was submitted.
File Characteristics
| Fact Name | Description |
|---|---|
| Purpose | The IRS Form 2553 is used by small businesses to elect to be taxed as an S Corporation. |
| Eligibility | To qualify, a business must meet specific criteria, including having no more than 100 shareholders and only one class of stock. |
| Filing Deadline | The form must be filed within 75 days of the beginning of the tax year in which the election is to take effect. |
| State-Specific Forms | Some states require additional forms for S Corporation election, governed by their respective state laws. |
| Signature Requirement | All shareholders must sign the form, indicating their consent to the S Corporation election. |
| IRS Processing Time | After submission, the IRS typically processes Form 2553 within 60 days, but delays can occur. |
Form Sample
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 # |
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 # |
|
|
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.
▶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.
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 |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
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)
(4)
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. |
|
Form 2553 (Rev. |
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
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.
Form 2553 (Rev. |
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.
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.
2. Ownership Tax Year ▶ |
I represent that shareholders (as described in section 5.08 of Rev. Proc. |
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.
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
QBusiness
1. Check here ▶ 
if the fiscal year entered in item F, Part I, is requested under the prior approval provisions of Rev. Proc.
Yes |
No |
2.Check here ▶ 
to show that the corporation intends to make a
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
RSection 444
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.
Form 2553 (Rev. |
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
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
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.