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What is IRS Form 2553?

IRS Form 2553 is mostly used by small businesses to register as S Corporations rather than the standard C Corporations. This form is typically filed by business owners for its tax advantage purposes. S corporations save on taxes since the shareholders of the corporation are only taxed once on the corporation's taxable income.

What are the requirements to file Form 2553?

A small business must fulfill certain requirements in order to be qualified to file Form 2553 and elect to register as a S Corporation. These prerequisites consist of:

  • The business must be a domestic corporation or entity.

  • All shareholders in the corporation must be US Citizens or residents

  • Corporation cannot have more than 100 shareholders

  • Shareholders can only individuals, estates, exempt organizations, or certain trust.

  • The business can only have one class of stock

  • The corporation must adopt or change to one of the following tax years:

    • Natural Business Year - Tax year ending December 31 (This is the case for most businesses)

    • Ownership Tax Year

    • Tax Year elected under IRS section 444

When Should I File Form 2553?

The election to be regarded as a S Corp is valid as long as Form 2553 is filed by a small business and accepted by the IRS; the business owner does not have to file this form on an annual basis.

This form however, does have a due date, and it must be submitted by that date in order for it to be effective for the tax year for which you are filing. There are two ways for a company to submit Form 2553:

Scenario 1: No later than two months and 15 days after the beginning of the tax year that

the S Corp election is to take effect. This means that this forms has to be filed by February 15 of the election year if you have a natural business year ending December 31. If received after that year, your election will be effective beginning the following tax year.

Scenario 2: Any time during the tax year prior to the tax year the S Corp election is to take effect.

This means that if you are planning to take the election the upcoming year, then you can file this form any time during the current year before the election year.

I'm late and want the election for the current year?

If you are late filing Form 2553 and still want to elect to be an S Corp for the current tax year, you do have some relief options. If you meet the following requirements, you may be able to file Form 2553 late.

  1. The corporation planned to file an S Corp by the deadline.

  2. The corporation was not disqualified from becoming an S Corp for any other reason- it was only the late filing that disqualified the corporation.

  3. There is reasonable cause for missing the filing deadline.

  4. The corporate submits statements attesting that all shareholders reported their income in a manner consistent with the corporation’s intention to file as an S Corp.

DYI Form 2553 Filing.

I have found this video to be very helpful in filing out this form. The Narrator goes step by step and explains each line of the form for you to understand. If you find this form to be difficult even with the instructions we provide services where we prepare this form for you.

If you have any questions or need assistance we are happy to help, give us a call.

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