What is Form 2553 ?
Form 2553, also known as the "Election by a Small Business Corporation," is a crucial document for businesses aiming to be taxed as S corporations in the United States. Completing this form allows qualifying corporations to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes, thereby avoiding double taxation. It's a relatively straightforward form, consisting of a few sections requiring details such as the corporation's name, address, tax identification number, and the names and signatures of shareholders consenting to the S corporation election. Additionally, it includes information about the corporation's fiscal year and the effective date of the S corporation status. Submitting Form 2553 is essential for small businesses seeking to optimize their tax structure and streamline their tax obligations under the S corporation classification.
What is Form 2553 Used For ?
IRS Form 2553 is used by eligible corporations in the United States to elect to be treated as an S corporation for federal tax purposes. S corporations offer certain tax advantages, including the ability to pass income, losses, deductions, and credits through to shareholders, who report these items on their individual tax returns. This avoids the double taxation that can occur with traditional C corporations, where the corporation is taxed on its profits, and then shareholders are taxed again on dividends or distributions. By filing Form 2553 with the Internal Revenue Service (IRS), eligible corporations can elect S corporation status, provided they meet certain criteria such as having no more than 100 shareholders, only one class of stock, and meeting certain ownership requirements.
Who is Eligible to File Form 2553 ?
To be eligible to file Form 2553, a corporation must meet several criteria set forth by the Internal Revenue Service (IRS). Here are the main eligibility requirements:
1) Type of Corporation: The entity must be a domestic corporation, including a limited liability company (LLC) that has elected to be treated as a corporation for tax purposes.
2) Number of Shareholders: The corporation must have no more than 100 shareholders. Certain family members can be treated as a single shareholder for this purpose.
3) Types of Shareholders: Shareholders must be individuals, estates, certain types of trusts, or certain tax-exempt organizations. Partnerships, corporations, and non-resident aliens are generally not eligible shareholders.
4) Classes of Stock: The corporation can have only one class of stock. However, differences in voting rights are permissible as long as all shares confer identical rights to distribution and liquidation proceeds.
5) United States Entity: The corporation must be a domestic corporation organized under the laws of any state or territory of the United States.
6) Consent of Shareholders: All shareholders must consent to the S corporation election by signing Form 2553.
7) Timing: Form 2553 must generally be filed no later than two months and 15 days after the beginning of the tax year for which the election is to take effect. However, the IRS may allow a late election under certain circumstances.
Certain types of entities, such as certain financial institutions, insurance companies, and domestic international sales corporations, are not eligible.
How to File Form 2553 ?
Filing Form 2553 involves several steps to ensure accurate submission to the Internal Revenue Service (IRS). Here's a general guide on how to file Form 2553:
1) Obtain Form 2553: You can download Form 2553 from the IRS website (irs.gov) or obtain it from your tax advisor.
2) Complete Form 2553: Fill in all required information on Form 2553, including the corporation's name, address, Employer Identification Number (EIN), date of incorporation, fiscal year-end, and details about shareholders and officers. Make sure to follow the instructions provided with the form carefully to ensure accuracy.
3) Specify Election Information: Indicate the tax year for which the election is effective. Generally, this is the year following the year the form is filed, but you may choose an earlier or later effective date within the allowed timeframe.
4) Shareholder Consent: Ensure that all shareholders of the corporation sign Form 2553 to consent to the S corporation election. Each shareholder must provide their name, address, and taxpayer identification number (Social Security Number or EIN) on the form.
5) Authorized Officer Signature: An authorized officer of the corporation must sign and date Form 2553. This person is typically the president, vice president, treasurer, assistant treasurer, chief accounting officer, or any other corporate officer authorized to sign.
6) File Form 2553: Once completed and signed, file Form 2553 with the IRS. You can file the form by mail or fax, depending on your preference and the options available at the time of filing. Mail or Fax the completed Form 2553 to the appropriate IRS address as specified in the form instructions. Make sure to include any required attachments and keep a copy of the form for your records.
7) Form 2553 Deadline:
The filing deadline is typically no later than two months and 15 days after the beginning of the tax year for which the election is to take effect. However, the IRS may allow a late election under certain circumstances.
8) Confirmation and Recordkeeping: After filing Form 2553, you should receive confirmation of receipt from the IRS. Keep this confirmation, along with a copy of the filed form, for your records.
9) Follow-Up: If you do not receive confirmation from the IRS within a reasonable time after filing, or if you have any questions or concerns about the status of your S corporation election, follow up with the IRS or consult with a tax professional for assistance.
It's essential to review the instructions provided by the IRS for Form 2553 and to consult with a tax professional or legal advisor if you have any questions or concerns about completing or filing the form correctly.
Where to File Form 2553 ?
The mailing address for Form 2553 depends on the location of the corporation's principal business address and whether it is filing as a regular corporation or as a member of a controlled group. Here are the mailing addresses or fax number for Form 2553:
|
If the corporation’s principal
business, office, or agency is located in |
Use the following address or
fax number |
|
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 |
Late Filing of Form 2553
If you missed the deadline for filing Form 2553 to elect S corporation status for your corporation, you may still be able to request a late filing with the Internal Revenue Service (IRS). Here are the steps you can take:
1) File as Soon as Possible: Even though you missed the deadline, it's essential to file Form 2553 as soon as you can. The longer you wait, the more complicated the process might become.
2) Include Explanation for Late Filing: Along with Form 2553, include a letter explaining why the form is being filed late. Provide any relevant information or circumstances that led to the delay. The IRS may grant relief for late elections if there is reasonable cause for the delay.
3) Attach Statement of Consent: If applicable, attach a statement signed by all shareholders who were shareholders during the period the election is intended to be effective. This statement should indicate their consent to the late S corporation election.
4) Submit to the IRS: File the completed Form 2553, along with any additional documentation, with the IRS. The address for filing may depend on your corporation's location, so check the instructions for Form 2553 for the appropriate mailing address.
5) Await IRS Response: After filing, the IRS will review your submission. If they approve the late filing, they will provide confirmation of the S corporation election's acceptance.
6) Pay Attention to Deadlines: Note that the IRS typically has its own rules and procedures regarding late filings, and they may or may not grant relief based on the circumstances. It's crucial to adhere to any deadlines or requests for additional information from the IRS.
7) Seek Professional Advice: Consider consulting with a tax professional or legal advisor for guidance on filing Form 2553 late and navigating the process effectively. They can help ensure that you provide all necessary documentation and increase your chances of obtaining approval for the late election.
FAQ's
When should Form 2553 be filed?
Form 2553 should generally be filed no later than two months and 15 days after the beginning of the tax year for which the election is to take effect. However, the IRS may allow a late election under certain circumstances.
What are the consequences of filing Form 2553 late?
Filing Form 2553 late may result in the IRS rejecting the S corporation election. However, the IRS may grant relief for late elections under certain conditions, such as demonstrating reasonable cause for the delay.
Can an S corporation election be revoked or terminated?
Yes, an S corporation election can be revoked or terminated under certain circumstances. This may occur voluntarily by filing Form 1120S, Schedule H, "Termination or Revocation of Election to be Treated as an S Corporation," or involuntarily by the IRS if the corporation no longer meets the eligibility requirements.
Can Form 2553 be electronically filed?
Yes, Form 2553 can be electronically filed with the IRS. Corporations can file electronically using the IRS's online e-file system or through authorized tax professionals.
Do all shareholders need to sign Form 2553?
Yes, all shareholders who own stock during any part of the tax year for which the election is effective must sign Form 2553 to consent to the S corporation election.