What is IRS Form 2553?
Business owners who have structured their business as a C corporation (C corp) or limited liability company (LLC) have the option of electing to file taxes as an S corporation. To do this, you'll have to file IRS form 2553 (also known as tax form 2553). After successfully filing this form, the IRS (Internal Revenue Service) will view your business as an S corporation for tax purposes.
Why file form 2553 and become an S corp?
Essentially, S corporations don’t pay corporate taxes on their profits; instead, the business owners or shareholders pay taxes on those profits their individual income tax returns. This makes an S corp a pass-through entity, similar to a partnership or LLC. Comparatively, C corporations pay a corporate tax with a tax rate of 21% in addition to what shareholders pay on their personal tax return, resulting in double taxation.
So if an S corp is also a pass-through entity, where do the tax savings come from? Well, if you elect to be taxed as an S corp, you can generate tax savings on profits that are above the "reasonable compensation" that you are required to pay yourself as an owner-employee of the S corporation. In other words, if you expect to generate significant profits, and expect to pay out those earnings to owners, electing to file taxes as an S corp may make a lot of sense.
Do note, however, that S corporations are also taxed differently at the state level. This means an S corporation designation isn’t always a surefire way to reduce your tax bill.
Further reading: The Complete Guide to S Corporation Taxes
Eligibility requirements for filing form 2553
To be eligible to file form 2553 for an S corporation election, you must first be a C corporation, or deemed as such in the case of the LLC structure. Your company must also satisfy the following requirements:
- You are a “domestic” entity based and operating in the United States
- You only have “allowable” shareholders (no partnerships, other corporations, or non-U.S. residents as shareholders)
- You have no more than 100 shareholders total
- You have one class of stock (meaning you can’t have a two-tiered common and preferred stock system)
- You are not an insurance company, bank, or a domestic international sales corporation
- All of your company’s shareholders unanimously consent to S corporation status—proven with a provided consent statement
Form 2553 instructions
Start by downloading a copy of form 2553 from IRS.gov. There are four parts to form 2553 and here’s the instructions for each one.
Part I: Election Information
This is where you provide basic information about your company. Prepare the following:
- The name, address, date of incorporation, state of incorporation and employer identification number for your business
- The name and contact information for the corporate officer who the IRS can contact about your application
- The tax year (fiscal year) for which your company intends to hold S corporation status
Forms must be filed by two months and 15 days after your tax year. For businesses whose tax year is the calendar year, this means you must file by March 15. If you’re making a late election, you will also have an opportunity to provide an explanation as to why on page 1.
On page 2, you provide information on your shareholders. For each shareholder, you provide their name, address, signature, number of shares (or percentage of ownership) and social security number.
Part II: Selection of Fiscal Tax Year
Your fiscal year (or tax year) is the 12-month period that you use for financial reporting. Most businesses will use the calendar year (January to December) as their fiscal year.
In this section, you are asked some simple questions about whether you are changing or retaining your tax year. You may have a non-calendar tax year if you’re filing based on your natural business year or if you’re making section 444 tax payments.
Further reading: Fiscal Year Explained: How To Choose One For Your Business
Part III: Qualified Subchapter S Trust (QSST) Election Under Section 1361(d)(2)
The name of this section can be daunting, but it’s only relevant for trusts applying for S corporation status. If you’re a trust applying for S corp status, list the income beneficiary’s name, address, and social security number, and the trust’s name, address, and employer identification number.
Part IV: Late Corporate Classification Election Representations
This section is for any businesses filing their application past the IRS deadline. As a reminder, to qualify for S corporation status in the same year you’re applying for it, your deadline to file is two months and 15 days after the beginning of the tax year.
For example, if you want 2024 to be your first tax year as an S corp and your tax year begins on January 1, you must file form 2553 by March 15, 2024.
How to submit a completed form 2553
You cannot file form 2553 online or electronically. The original election (i.e. no photocopies) of the completed form 2553 must be mailed or faxed to an Internal Revenue Service Center.
There are two Department of the Treasury Internal Revenue Service Center locations. Which location you send it to depends on your corporation’s principal business, office, or agency location. You can find the fax number and mailing address that you submit your form 2553 to on page 3 of the form 2553 instructions PDF. We’ve provided them below.
What is the deadline to submit 2553?
There is no single deadline to submit form 2553. A completed form 2553 can be submitted any time of the year. However, when you file affects when the IRS recognizes you as an S corporation.
To become an S corp in the next tax year, you must file form 2553 prior to two months and fifteen days after the start of the current tax year.
Most businesses use the calendar year as their tax year meaning they close their books on December 31. For these businesses, if they want to become an S corp in 2024, the due date is March 15, 2024.
It’s possible to file form 2553 after the deadline, however you won’t be granted S corp status until the following tax year. So if your deadline for S corp election in 2024 is March 15 and you file form 2553 on March 16, 2024, you will not be granted S corp status until 2025.
Filing form 2553 late
Under certain conditions, the IRS may grant you S corporation status for the current tax year in the case of a late filing.
You are eligible to file a late election if:
- You planned to file as an S corporation by the intended effective date
- You have a reasonable cause for missing the deadline
- All shareholders have reported their income in compliance with S corporation standards—with the business’s income split between the members—based on the entity’s intention to elect for S corporation status and the corporation has supporting documentation to prove it
If you meet these requirements, you must write “FILED PURSUANT TO REV. PROC. 2013-30” at the top of form 2553.
How long does the process take?
Typically, you will get a verdict on your form 2553 application within 60 days of submitting it to the IRS. If you have not heard back in that timeframe, reach out to the IRS directly. You can call the IRS at (800) 829-4933 to check the status of your application.
How to get a copy of form 2553
Once approved, you’re considered an S corporation for federal tax purposes and will receive a letter indicating acceptance. But you will need to keep a copy of the completed form 2553. It’s required for when you file your taxes.
If you need to replace a lost form 2553, you will have to contact the IRS to request a new copy to file taxes as an S corp. Call the IRS Business and Specialty Tax line at 1-800-829-4933. You will need to confirm your identity by providing your corporation’s name and address, your EIN, the business’s contact details, and your name and role within the company.
