The IRS Form 2553 is a crucial document that allows a corporation to elect to be taxed as an S corporation. This election can provide significant tax benefits, including avoiding double taxation on corporate income. Understanding how to properly complete and submit this form is essential for any business owner looking to optimize their tax situation.
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The IRS Form 2553 is an important document for small business owners who wish to elect S Corporation status. Here are key takeaways to consider when filling out and using this form:
By following these key takeaways, business owners can navigate the complexities of the IRS Form 2553 more effectively, ensuring a smoother transition to S Corporation status.
When filling out the IRS Form 2553, it is essential to follow specific guidelines to ensure accuracy and compliance. Here are five things to do and five things to avoid:
Incorrect Election Year: One common mistake is failing to specify the correct tax year for the S Corporation election. It's essential to ensure that the election year is clearly indicated, as this affects the corporation's tax status.
Missing Signatures: Often, individuals overlook the requirement for all shareholders to sign the form. Each shareholder must provide their signature, as this validates the election and confirms their consent.
Filing Deadline Awareness: Many people are unaware of the deadlines for submitting Form 2553. Missing the deadline can result in the election being denied, so it’s crucial to submit the form on time.
Inaccurate Shareholder Information: Providing incorrect or incomplete information about shareholders is another frequent error. This includes names, addresses, and Social Security numbers, which must be accurate for proper processing.
Failure to Follow Instructions: Lastly, not following the instructions provided by the IRS can lead to mistakes. Each section of the form has specific requirements, and overlooking these can result in complications.
The IRS Form 8832, also known as the Entity Classification Election, is similar to Form 2553 in that it allows businesses to choose how they want to be classified for tax purposes. While Form 2553 is specifically for S corporations, Form 8832 can be used by various types of entities, including partnerships and limited liability companies (LLCs). Both forms require timely submission to ensure the desired tax treatment is applied, and they both involve a choice that can significantly affect how the entity is taxed at the federal level.
The IRS Form 1065 is another document that shares similarities with Form 2553. This form is used by partnerships to report income, deductions, gains, and losses. Like Form 2553, it reflects the entity's choice of tax treatment, but instead of electing S corporation status, it is used to report the income of a partnership. Both forms require accurate information about the entity's financial activities and necessitate the distribution of K-1 forms to partners or shareholders for their personal tax filings.
Form 1120 is the U.S. Corporation Income Tax Return, which is similar to Form 2553 in that it is used by corporations to report their income and calculate taxes owed. While Form 2553 is an election form for S corporation status, Form 1120 is the actual tax return for C corporations. Both forms require detailed financial information, and the choice between S and C corporation status can influence the tax obligations outlined in Form 1120.
The IRS Form 941, Employer’s Quarterly Federal Tax Return, is relevant in this context because it is used by employers to report income taxes, Social Security tax, and Medicare tax withheld from employee wages. While not a direct election form like 2553, it is essential for S corporations to file this form to report their employment tax obligations. Both forms involve compliance with IRS regulations and require timely submission to avoid penalties.
Form 1065-B, the U.S. Return of Income for Electing Large Partnerships, is another document with similarities to Form 2553. This form is used by large partnerships that elect to be taxed as partnerships rather than corporations. Both forms allow entities to choose their tax treatment and require detailed reporting of financial activities. The distinction lies in the size and structure of the partnership, but the underlying principle of tax classification remains consistent.
To ensure a proper transition of vehicle ownership, it is advisable to complete the Motor Vehicle Bill of Sale form accurately and promptly. This will help facilitate the sale of your vehicle, making the process smoother. For more information about the requirements, refer to this essential guide on the Motor Vehicle Bill of Sale.
The IRS Form 1120-S is specifically designed for S corporations and is closely related to Form 2553. After an entity elects S corporation status using Form 2553, it must file Form 1120-S annually to report its income, deductions, and credits. Both forms are integral to the S corporation election process, with Form 2553 establishing the status and Form 1120-S detailing the financial performance of the corporation during the tax year.
Lastly, Form 8862, Information to Claim Earned Income Credit After Disallowance, is relevant for individuals who have previously been denied the Earned Income Credit (EIC) and wish to claim it again. While it does not directly relate to business tax classification, it highlights the importance of accurate tax reporting and compliance. Both Form 2553 and Form 8862 require careful attention to detail and adherence to IRS guidelines to ensure eligibility for specific tax benefits.
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The IRS Form 2553 is a form used by small businesses to elect to be taxed as an S corporation. This election allows the business to avoid double taxation on corporate income, as profits and losses can be passed directly to shareholders. By filing this form, a corporation can take advantage of certain tax benefits, provided it meets specific eligibility requirements.
To be eligible for S corporation status, a business must meet several criteria, including:
Form 2553 should be filed within 75 days of the beginning of the tax year when the S corporation election is to take effect. For new businesses, this typically means filing the form within 75 days of the incorporation date. If the deadline is missed, the business may have to wait until the next tax year to make the election.
When completing Form 2553, you will need to provide various pieces of information, including:
Once Form 2553 is submitted, the IRS will review the application. If approved, the corporation will be granted S corporation status. The IRS typically sends a confirmation letter to the corporation. If there are any issues or if the form is incomplete, the IRS may contact the corporation for clarification or additional information.
Yes, a corporation can revoke its S corporation status. This can happen voluntarily, typically by filing a statement of revocation with the IRS. A majority of shareholders must agree to the revocation. Additionally, the corporation may lose its S corporation status if it fails to meet the eligibility requirements or if it does not file the necessary forms in a timely manner.
Yes, electing S corporation status has several tax implications. The most significant benefit is that the corporation itself does not pay federal income tax. Instead, income, losses, deductions, and credits are passed through to shareholders, who report them on their individual tax returns. However, shareholders must also be aware of potential self-employment tax implications and other state-specific regulations that may apply.
Note: Form 2553 begins on the next page.
Where To File Form 2553 after 6/17/19
If the corporation’s principal business, office,
Use the following address
or agency is located in
or fax number
Connecticut, Delaware, District of Columbia,
Department of the Treasury
Georgia, Illinois, Indiana, Kentucky, Maine,
Internal Revenue Service
Maryland, Massachusetts, Michigan, New
Kansas City, MO 64999
Hampshire, New Jersey, New York, North Carolina,
Ohio, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Vermont, Virginia, West Virginia,
Fax # 855-887-7734
Wisconsin
Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Florida, Hawaii, Idaho, Iowa, Kansas,
Louisiana, Minnesota, Mississippi, Missouri,
Ogden, UT 84201
Montana, Nebraska, Nevada, New Mexico, North
Dakota, Oklahoma, Oregon, South Dakota, Texas,
Utah, Washington, Wyoming
Fax # 855-214-7520
Form 2553
(Rev. December 2017)
Department of the Treasury Internal Revenue Service
Election by a Small Business Corporation
(Under section 1362 of the Internal Revenue Code)
(Including a late election filed pursuant to Rev. Proc. 2013-30)
▶You can fax this form to the IRS. See separate instructions.
▶Go to www.irs.gov/Form2553 for instructions and the latest information.
OMB No. 1545-0123
Note: This election to be an S corporation can be accepted only if all the tests are met under Who May Elect in the instructions, all shareholders have signed the consent statement, an officer has signed below, and the exact name and address of the corporation (entity) and other required form information have been provided.
Part I
Election Information
Name (see instructions)
A Employer identification number
Type
Number, street, and room or suite no. If a P.O. box, see instructions.
B Date incorporated
or
Print
City or town, state or province, country, and ZIP or foreign postal code
C State of incorporation
D
Check
the applicable box(es) if the corporation (entity), after applying for the EIN shown in A above, changed its
name or
address
EElection is to be effective for tax year beginning (month, day, year) (see instructions) . . . . . . ▶
Caution: 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.
FSelected tax year:
(1) Calendar year
(2) Fiscal year ending (month and day) ▶
(3) 52-53-week year ending with reference to the month of December
(4) 52-53-week year ending with reference to the month of ▶
If box (2) or (4) is checked, complete Part II.
GIf more than 100 shareholders are listed for item J (see page 2), check this box if treating members of a family as one shareholder results in no more than 100 shareholders (see test 2 under Who May Elect in the instructions) ▶
HName and title of officer or legal representative whom the IRS may call for more information
Telephone number of officer or legal representative
IIf 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 IV 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. See instructions.
Under penalties of perjury, I declare that I have examined this election, including accompanying documents, and, to the best of my
Sign knowledge and belief, the election contains all the relevant facts relating to the election, and such facts are true, correct, and complete.
Here
▲Signature of officer
Title
Date
For Paperwork Reduction Act Notice, see separate instructions.
Cat. No. 18629R
Form 2553 (Rev. 12-2017)
Page 2
Name
Employer identification number
Part I Election Information (continued) Note: If you need more rows, use additional copies of page 2.
J
Name and address of each
shareholder or former shareholder required to consent to the election.
(see instructions)
K
Shareholder’s Consent Statement
Under penalties of perjury, I declare that I consent to the election of the above-named corporation (entity) to be an S corporation under section 1362(a) and that I have examined this consent statement, including accompanying documents, and, to the best of my knowledge and belief, the election contains all the relevant facts relating to the election, and such facts are true, correct, and complete. I understand my consent is binding and may not be withdrawn after the corporation (entity) has made a valid election. If seeking relief for a late filed election, I also declare under penalties of perjury that I have reported my income on all affected returns consistent with the S corporation election for the year for which the election should have been filed (see beginning date entered on line E) and for all subsequent years.
Signature
L
Stock owned or
percentage of ownership
Number of
shares or
percentage
Date(s)
of ownership
acquired
M
Social security
number or
N
employer
Shareholder’s
identification
tax year ends
number (see
(month and
instructions)
day)
Page 3
Part II
Selection of Fiscal Tax Year (see instructions)
Note: All corporations using this part must complete item O and item P, Q, or R.
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.
PComplete 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 (as defined in section 5.07 of Rev. Proc. 2006-46) or (2) a year that satisfies the ownership tax year test (as defined in section 5.08 of Rev. Proc. 2006-46). Check the applicable box below to indicate the representation statement the corporation is making.
1. Natural Business Year ▶
I represent that the corporation is adopting, retaining, or changing to a tax year that qualifies
as its natural business year (as defined in section 5.07 of Rev. Proc. 2006-46) and has attached a statement showing separately for each month the gross receipts for the most recent 47 months. See instructions. I also represent that the corporation is not precluded by section 4.02 of Rev. Proc. 2006-46 from obtaining automatic approval of such adoption, retention, or change in tax year.
2. Ownership Tax Year ▶
I represent that shareholders (as described in section 5.08 of Rev. Proc. 2006-46) holding more
than half of the shares of the stock (as of the first day of the tax year to which the request relates) of the corporation have the same tax year or are concurrently changing to the tax year that the corporation adopts, retains, or changes to per item F, Part I, and that such tax year satisfies the requirement of section 4.01(3) of Rev. Proc. 2006-46. I also represent that the corporation is not precluded by section 4.02 of Rev. Proc. 2006-46 from obtaining automatic approval of such adoption, retention, or change in tax year.
Note: If you do not use item P and the corporation wants a fiscal tax year, complete either item Q or R below. Item Q is used to request a fiscal tax year based on a business purpose and to make a back-up section 444 election. Item R is used to make a regular section 444 election.
QBusiness Purpose—To request a fiscal tax year based on a business purpose, check box Q1. See instructions for details including payment of a user fee. You may also check box Q2 and/or box Q3.
1. Check here ▶ if the fiscal year entered in item F, Part I, is requested under the prior approval provisions of Rev. Proc. 2002-39, 2002-22 I.R.B. 1046. Attach to Form 2553 a statement describing the relevant facts and circumstances and, if applicable, the gross receipts from sales and services necessary to establish a business purpose. See the instructions for details regarding the gross receipts from sales and services. If the IRS proposes to disapprove the requested fiscal year, do you want a conference with the IRS National Office?
Yes
No
2.Check here ▶ to show that the corporation intends to make a back-up section 444 election in the event the corporation’s business purpose request is not approved by the IRS. See instructions for more information.
3.Check here ▶ to show that the corporation agrees to adopt or change to a tax year ending December 31 if necessary for the IRS to accept this election for S corporation status in the event (1) the corporation’s business purpose request is not approved and the corporation makes a back-up section 444 election, but is ultimately not qualified to make a section 444 election, or (2) the corporation’s business purpose request is not approved and the corporation did not make a back-up section 444 election.
RSection 444 Election—To make a section 444 election, check box R1. You may also check box R2.
1.Check here ▶ to show that the corporation will make, if qualified, a section 444 election to have the fiscal tax year shown in item F, Part I. To make the election, you must complete Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, and either attach it to Form 2553 or file it separately.
2.Check here ▶ to show that the corporation agrees to adopt or change to a tax year ending December 31 if necessary for the IRS to accept this election for S corporation status in the event the corporation is ultimately not qualified to make a section 444 election.
Page 4
Part III Qualified Subchapter S Trust (QSST) Election Under Section 1361(d)(2)* Note: If you are making more than
one QSST election, use additional copies of page 4.
Income beneficiary’s name and address
Social security number
Trust’s name and address
Date on which stock of the corporation was transferred to the trust (month, day, year) . . . . . . . . ▶
In order for the trust named above to be a QSST and thus a qualifying shareholder of the S corporation for which this Form 2553 is filed, I hereby make the election under section 1361(d)(2). Under penalties of perjury, I certify that the trust meets the definitional requirements of section 1361(d)(3) and that all other information provided in Part III is true, correct, and complete.
Signature of income beneficiary or signature and title of legal representative or other qualified person making the election
*Use Part III to make the QSST election only if stock of the corporation has been transferred to the trust on or before the date on which the corporation makes its election to be an S corporation. The QSST election must be made and filed separately if stock of the corporation is transferred to the trust after the date on which the corporation makes the S election.
Part IV Late Corporate Classification Election Representations (see instructions)
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.
1The requesting entity is an eligible entity as defined in Regulations section 301.7701-3(a);
2The requesting entity intended to be classified as a corporation as of the effective date of the S corporation status;
3The 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);
4The 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
5a 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
bThe 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.