What is Form 2553?
In order for a business to be elected as an S-Corporation and, in turn, be taxed as such, they would need to apply and submit an Election by a Small Business Corporation form, or Form 2553 for short. Form 2553 is a form provided by the Internal Revenue Service for businesses and corporations to apply to be elected as an S-Corporation.
An S-Corporation, which stands for “Subchapter S Corporation” or “Small Business Corporation” is a type of corporation that meets the requirements set by the IRS’ regarding the way they will be taxed. An S-Corporation does not pay any tax; instead of paying taxes with its income, an S-Corporation can pass their corporate income, deductions, and credits to their shareholders instead. Basically, an S-Corporation can state that the revenue earned by the business or corporation as their own personal income.
What is the purpose of Form 2553?
The purpose of filing for Form 2553 is for small businesses and other certain corporations and entities to be elected and taxed as an S-Corporation.
Who should file for Form 2553?
Small businesses, corporations, and other entities that fulfill and meet the requirements set by the IRS may opt to file for Form 2553 so that they can be considered to be elected as an S-Corporation.
Being recognized as an S-Corporation may reap many benefits for business and other business entities alike. It should be noted, though, that not all small businesses would be up for consideration to be an S-Corporations. There are also some conditions that need to be met in order for a business or business entity to become elected as an S-Corporation.
Where should I file and submit Form 2553?
Please be advised that Form 2553 cannot be filed electronically and must, therefore, be either mailed or faxed.
The addresses for mailing or faxing are different and dependent on your state. Below are the corresponding mailing/faxing address for the following states:
Mailing address and fax numbers
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, Wisconsin
Department of the Treasury Internal Revenue Service Kansas City, MO 64999
Fax # 855-887-7734
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, Wyoming
Department of the Treasury Internal Revenue Service Ogden, UT 84201
Fax # 855-214-7520
When should I file and submit Form 2553?
It is a general rule that Form 2553 must be submitted by March 15 at the latest, or within or on the second (2nd) month and fifteenth (15th) day of the tax year in which the business or entity wants the election of being an S-Corporation to start. Established businesses or business entities may also choose to file their Form 2553 any time during the previous tax year.
It should be noted that deadlines for submitting Form 2553 may vary for companies and businesses following a non-calendar tax year. Below are some business entity types and their corresponding deadlines to file their Form 2553 for the year:
- Established business: Businesses or entities that wish to be elected as an S-Corporation and be taxed as such must file their Form 2553 by March 15, 2021, but may also choose to file their Form 2553 anytime during 2020.
- New business: New businesses should file their Form 2553 by March 15, 2021, but they cannot file their Form 2553 before January 1.
- Seasonal businesses: October 1 is the start of the tac year of seasonal businesses and they should file their Form 2553 by December 15.
Nevertheless, regardless of your business type and their corresponding deadline for filing Form 2553, always make sure to submit the form on time - or before the deadlines, if possible - to avoid any issues with filing. Belated submissions of Form 2553 may render you having to wait another full year for your election to happen.
How do I fill out and accomplish Form 2553?
Form 2553 is a form composed of four (4) pages and is composed of four (4) parts. The parts are as follows:
- Election Information
- Selection of Fiscal Tax Year
- Qualified Subchapter S Trust (QSST) Election Under Section 1361 (d)(2)
- Late Corporate Classification Election Representations
To begin accomplishing the form, start by filling out Part 1 and providing the necessary information being asked. Part 1 of Form 2553 will require you to report and write down some general information regarding your business/entity.
The first question will ask you to provide the complete name of your business/entity.
Then the address at which your business/entity is located at (include number, street, and room or suite no, city or town, state or province, country and Zip or foreign postal code).
Then, the rest of the questions in the form will be listed. Write down or select the necessary information being asked legibly and accurately in the spaces or boxes provided.
A. Employer Identification Number or EIN (if applicable).
B. Date EIN was incorporated.
C. State EIN was incorporated.
D. Check the applicable box(es) if the corporation (entity), after applying for the EIN show A above, changed its name or address.
E. Dictate using mm/dd/yyyy format the date the election is to be effective for tax year.
It should be noted, though, that 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.
F. Selected tax year.
Tick the box that applies to the S-Corporation's selected tax year. Please note that if box two (2) or box four (4) is selected, you must report the other necessary information needed about the selected tax year and accomplish Part 2 of Form 2553.
G. If more than one-hundred (100) shareholders are listed for Item J, check this box if treating members of a family as one shareholder results in no more than one-hundred (100) shareholders.
H. Name and title of officer or legal representative whom the IRS may call for more information and telephone number of officer or legal representative.
I. If 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 4 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.
The last section of Part 1 is a table and it contains items J, K, L, M, and N.
J. Name and address of each shareholder or former shareholder required to consent to the election.
K. Shareholder’s Consent Statement.
L. Stock owned or percentage of ownership.
List down also the numbers of shares or percentage of ownership. Also dictate the dates you and the rest of the shareholders acquired them.
M. Social Security Number (SSN) or EIN of shareholders.
N. Shareholder’s tax year ends
For Part 2, Selection of Fiscal Tax Year, begin by filling out item O.
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.
P. Complete 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 or (2) a year that satisfies the ownership tax year test. Check the applicable box below to indicate the representation statement the corporation is making.
1. Natural Business Year
2. Ownership Tax Year
It should be noted that, if you do not use item P and the corporation wants a fiscal tax year, complete either item Q or R below.
Q. Business Purpose—To request a fiscal tax year based on a business purpose, check box Q1. You may also check box Q2 and/or box Q3.
R. Section 444 Election—To make a section 444 election, check box R1. You may also check box R2.
Part 3 of Form 2553 is not applicable to majority of small businesses. Part 3 of Form 2553 must be accomplished by a Qualified Subchapter S Trust (QSST) that wants to hold stock in an S-Corporation.
For Part 3, Qualified Subchapter S Trust (QSST) Election Under Section 1361(d)(2), start by filling out the income beneficiary’s name and address, SSN, Trust’s name and address, and EIN.
Then, using the mm/dd/yyy format, input the date on which stock of the corporation was transferred to the trust.
Next, the income beneficiary must affix their signature, or the legal representative must affix their title and signature. If there is another qualified person making the election, they should affix their signature. The date of signing must also be included.
Part 4 of Form 2553, Late Corporate Classification Election Representations, is for 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:
1. The requesting entity is an eligible entity as defined in Regulations section 301.7701-3(a);
2. The requesting entity intended to be classified as a corporation as of the effective date of the S-Corporation status;
3. The 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);
4. The 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
5. a. 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
b. The 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.