What Is Form 2553?
Form 2553 is used by corporations and other eligible entities to elect S Corporation status. This election, made under Section 1362(a), allows a business to be taxed differently. Instead of paying taxes at the corporate level, the business’s income is typically taxed to its shareholders. However, an S Corporation may still owe taxes on certain types of income.
This form must be filed with the IRS within specific timeframes to make the election official, and businesses that meet the requirements don’t need to file a separate form (Form 8832).
Eligibility for S Corporation Status
To elect S Corporation status, your business must meet several criteria:
- It must be a domestic corporation or eligible entity and file Form 2553 on time.
- It can have up to 100 shareholders, with spouses and family counted as one.
- Shareholders must be individuals, estates, some tax-exempt organizations or trusts.
- Nonresident aliens are generally not allowed as shareholders.
- It must have only one class of stock, meaning all shares have the same rights.
- Certain businesses like banks and insurance companies cannot elect S Corporation status.
- It must choose a tax year that ends on December 31st or fits other qualifying options.
- All shareholders must consent to the S Corporation election.
When to File Form 2553?
You must file IRS Form 2553 within two and a half months (two months and 15 days) from the beginning of the tax year when you want the election to take effect. This deadline is crucial to ensure your business is classified as an S Corporation for the desired tax year.
There are two primary filing windows:
- No more than 2 months and 15 days after the start of the tax year: If your business’s tax year begins on January 1st, the form must be filed by March 15th to take effect that year.
- Any time during the tax year before it takes effect: If you want the election to take effect in the next tax year, you can file during the previous year.
If you miss this deadline, the election may not be valid until the following tax year, which could delay your business’s S Corporation benefits.
When Does the Tax Year Start?
The “start of the tax year” is generally the first day your business’s financial year begins. For most businesses, this is January 1st. However, if your business follows a fiscal year, the start date could be different. When filing Form 2553, your business must choose one of the following tax year options:
- a calendar year (ending December 31st)
- a natural business year
- an ownership tax year
- a tax year under section 444
- a 52-53-week tax year that matches one of the above
If you’re unsure about which tax year option to choose, check with your accountant to ensure you’re selecting the best option for your business.
Special Filing Situations
While the filing windows above apply to most businesses, there are a few special situations to keep in mind:
1. If your business is filing for the first time and has no prior tax year
For example, if your business starts on March 10, the filing period is from March 10 to May 25. To elect S Corporation status for this tax year, you’ll need to file within that window.
2. If your business is switching from a C Corporation to an S Corporation
If your tax year ends on December 31, you can file Form 2553 anytime during the prior year (before December 31) and up until March 15 of the next year to elect S Corporation status for the upcoming year.
3. If your business has a short tax year
If your business starts its first tax year later in the year (for example, in October), the filing window is shorter. You must file Form 2553 within two months and 15 days from the start of your tax year. For example, if your tax year begins on October 1, the filing deadline is December 15.
Once your business is approved for S Corporation status, it stays in effect unless you choose to terminate or revoke it. If you decide to end your S Corporation status, you can’t re-elect it until at least 5 tax years have passed, unless you get approval from the IRS.
How to Fill Out Form 2553
Filing Form 2553 is the first step to electing S Corporation status for your business. Follow these steps to ensure the form is filled out correctly and submitted on time.
Part I – Election Information
Start by entering your business’s name, address, EIN (Employer Identification Number), and date of incorporation in the appropriate boxes. Make sure to check the box indicating your corporation’s state of incorporation and select your election effective date. If this is for a first-year election or short tax year, be sure to fill that out accordingly.
Part I – Tax Year Selection
Next, decide on your corporation’s tax year by checking one of the options in Section F: whether you will use a calendar year, fiscal year, or a 52-53-week year. If you select a fiscal year, complete Part II for additional details.
Part I – Shareholder Details
In Section J, list all shareholders or former shareholders who need to consent to the election. Ensure that each shareholder’s name, address, percentage of stock ownership, and Social Security Number (SSN) or Employer Identification Number (EIN) are provided. Make sure they sign in Part K to indicate their consent to the election.
Part II – Fiscal Tax Year
If you’re opting for a fiscal year (not the calendar year), complete the relevant parts in Part II. This section includes additional questions for business-specific tax year elections, such as Natural Business Year or Ownership Tax Year. Follow the instructions carefully if you’re using Rev. Proc. 2006-46 for automatic approval.
Sign and Submit
After completing the form, an authorized officer of the corporation should sign and date the form under Part I. If the election is being filed late, check the box in Part I to explain the reason for the delay and make sure you include any necessary documentation.
Where to Mail Form 2553?
When you’re ready to file Form 2553, send the original form (not a photocopy) to the correct IRS address or fax it. If you’re faxing, be sure to keep the original form in your records. For certain late elections, you may also need to file Form 2553 with Form 1120-S.
If you’d prefer to use a private delivery service (PDS), you can, as long as it’s one the IRS recognizes. These services will also give you proof of when your form was mailed.
Filing Addresses
If your business is based in Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, or Wisconsin, send it to:
Kansas City, MO 64999
Fax: 855-887-7734
If your business is based in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, or Wyoming, send it to:
Ogden, UT 84201
Fax: 855-214-7520
Relief for Late S Corporation Elections
If you miss the deadline for filing IRS Form 2553 to elect S Corporation status, it’s still possible to request relief and be granted S Corporation status. To do this, you must explain the reason for the late filing and show that you acted quickly to correct the mistake once it was discovered.
Form 2553 can typically be filed up to three years and 75 days after the intended effective date. When submitting your late election, include a statement explaining the delay and provide confirmation from your shareholders that they have filed their taxes as if your business was already an S Corporation for the year it should have been.
If these conditions aren’t met, you may need to request a private letter ruling from the IRS, which could involve additional fees. If you’re also filing Form 1120-S late, you can attach the late Form 2553 to it, or file Form 2553 separately.
What Happens After You File Form 2553?
Once you file Form 2553, the IRS will notify you if your election is accepted and when it takes effect, usually within 60 days. If you checked Box Q1 in Part II, expect an additional 90 days for approval.
If you don’t hear back within 2 months (or 5 months with Box Q1), call 1-800-829-4933 to follow up.
How to Prove Your Filing
If the IRS questions your filing, proof can include:
- A certified or registered mail receipt (timely postmarked)
- Form 2553 with an acceptance stamp
- An IRS letter confirming receipt
Frequently Asked Questions
Can Form 2553 be signed electronically?
No, Form 2553 cannot be signed electronically for submission to the IRS. The IRS requires that the form be signed by the authorized officer of the corporation with a physical signature. While there are options for electronic signatures in certain situations for other forms, Form 2553 must be physically signed and either mailed or faxed to the IRS.
Can I file Form 2553 electronically?
No, Form 2553 cannot be e-filed directly with the IRS. It must be submitted by mail or fax. However, the IRS does allow e-filing of certain forms related to S Corporations, like Form 1120-S (the income tax return for S Corporations), but Form 2553 itself still needs to be filed through physical mail or fax.
Can I file Form 8832 and 2553 together?
Yes, you can file Form 8832 (Entity Classification Election) and Form 2553 (S Corporation Election) together. Complete both forms and submit them to the IRS at the appropriate address or by fax. If filing late, follow the necessary procedures for late submission.
