Ensuring accuracy can prevent delays or rejection of the form. You may file this form by fax or mail to the IRS service office assigned to your state of incorporation. Watch this instructional video to learn more about completing Form 2553 to elect S-corporation status. If you are making more than one QSST election, you may use additional copies of page 4 or use a separate election statement, and attach it to Form 2553.

Can a single-member LLC file Form 2553?

In this system, the profits or losses of the business are not taxed at the business level. Instead, they pass through to the owners’ personal tax returns and are taxed at each owners’ personal income tax rate. If a single member limited liability company (LLC) owns the corporation’s stock, and the LLC is treated as a disregarded entity for federal income tax purposes, enter the form 2553 owner’s name and address. For small business corporations, this form represents a strategic decision.

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• Knowing the right forms and documents to claim each credit and deduction is daunting.
• When you’re self-employed, all of your LLC or partnership’s net profits are subject to the 15.3% self-employment tax.
• If the corporation’s mailing address is the same as the owner’s or shareholder’s, enter “C/O” and the person’s name following the corporation’s name.
• Shareholders in an S corporation report income and losses on personal tax returns.
• If the corporation (entity) hasn’t received its EIN by the time the return is due, enter “Applied For” and the date the EIN was applied in the space for the EIN.
• Filing before the tax year begins is recommended for new corporations seeking timely S corporation status.

As a business owner, you have many responsibilities, especially when you’re starting a new business. One of the first things you have to do is select a tax classification for your business or entity. Not every business will benefit from or qualify for S-corp status.

About Form 2553, Election by a Small Business Corporation

• C corps and S corps also have different shareholder, ownership, and stock restrictions.
• Filing fees with the IRS are minimal but the additional bookkeeping and payroll costs are not.
• You must look at the Form 2553 instruction booklet to find additional information regarding the steps you must take to make the S corp election if you missed the filling deadline.
• Because the corporation had no prior tax year, an election made before January 7 won’t be valid.
• If your business is approved as an S corporation, you must keep a copy of your Form 2553 in your records, because you’ll need the form to file your taxes.
• We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

Part II of Form 2553 is for further information about the fiscal tax year. You only need to complete Part II of Form 2553 if you checked checkbox (2) or (4) in Part I, item F, which designates the chosen tax year your corporation will use. Part I of Form 2553 is for submitting election information, including the details of your corporation and all shareholders.

How To Fill Out Form 2553 for S-corps and LLCs

Completed forms must be sent to the correct IRS address or fax number. The address varies based on the location of the business. The IRS website provides current mailing and fax options. In order to become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders. See the Instructions for Form 2553 PDF for all required information and to determine where to file the form. If you check Box Q1, a user fee of $6,200 will apply.

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A corporation or other entity eligible to elect to be treated as a corporation must use Form 2553 to make an election under section 1362(a) to be an S corporation. Unlike many types of IRS tax forms that must be filed annually, once a business has been approved as an S corp, the status will remain valid. Still, this form does have a specific due date within the initial tax year for the business status to come into effect. This section also requires details about the desired effective date for the election.

If your business is approved as an S corporation, you must keep a copy of your Form 2553 in your records, because you’ll need the form to file your taxes. If you have filed Form 2553 to the correct address or fax number and have not heard back from the IRS within 60 days, it’s best to directly reach out to the IRS via telephone. Lastly, it’s worth gathering all relevant documentation to verify shareholder details. In certain events, such as a rejection for S corp status, you may need to submit this documentation to the IRS. But before you can elect to become an S corporation, also called S corp, you need to meet the eligibility requirements and file Form 2553 with the IRS. Sign up to receive more well-researched small business articles and topics in your inbox, personalized for you.

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This vigilance helps prevent any unexpected complications with the IRS regarding the corporation’s election status. To qualify for relief, your company must meet specific criteria. These include no history of late filing and reasonable cause for the delay. Ensure you understand these conditions before applying. To elect S corporation status, observe the IRS timeline.

The corporation’s legal representative must sign and date the first page of Form 2553. Corporations with over a hundred shareholders can still qualify for the election if treating family members as single shareholders reduces the number of shareholders below this threshold. This section of the IRC states that a small business corporation can elect to become an S corporation unless the election is a violation of the regulations presented in Section 1362.

Electing S corporation status brings numerous tax benefits to a business. This structure allows income and losses to bypass corporate taxes. IRS Form 2553 is an essential document for small businesses. It’s used to elect S corporation status for federal tax purposes. This election helps streamline tax duties for eligible businesses.