The IRS Form 2553 is a crucial document that allows eligible small businesses to elect S corporation status for tax purposes. By filing this form, a corporation or limited liability company can choose to be taxed as an S corporation, which can provide significant tax advantages. Understanding the requirements and implications of this form is essential for business owners looking to optimize their tax situation.
The IRS Form 2553 is an essential document for small business owners looking to elect S corporation status for their entities. This form allows eligible corporations and limited liability companies (LLCs) to pass corporate income, losses, deductions, and credits directly to shareholders, thereby avoiding double taxation at the corporate level. To qualify, businesses must meet specific criteria, including having no more than 100 shareholders and only one class of stock. The form must be filed within a designated timeframe, typically within two months and 15 days of the beginning of the tax year for which the election is to take effect. Completing the IRS 2553 requires accurate information about the business, its shareholders, and their consent to the S corporation election. Understanding the implications of this election is crucial, as it can significantly impact tax liabilities and overall business operations.
What is IRS Form 2553?
IRS Form 2553 is a document that allows a corporation to elect to be treated as an S corporation for federal tax purposes. By making this election, the corporation can avoid double taxation on its income, as the income is passed through to shareholders who report it on their personal tax returns.
Who is eligible to file Form 2553?
To be eligible to file Form 2553, a corporation must meet certain criteria. It must be a domestic corporation, have no more than 100 shareholders, and have only allowable shareholders, which include individuals, certain trusts, and estates. Additionally, the corporation cannot have more than one class of stock.
When should Form 2553 be filed?
Form 2553 should be filed within two months and 15 days after the beginning of the tax year when the S corporation election is to take effect. For a corporation that wants to elect S corporation status for the current tax year, the deadline is typically March 15 for corporations with a calendar year-end.
What information is required on Form 2553?
The form requires basic information about the corporation, including its name, address, and Employer Identification Number (EIN). It also asks for details about the shareholders, such as their names, addresses, and the number of shares they own. Additionally, the corporation must provide a signature from an authorized officer.
Can a corporation revoke its S corporation status?
Yes, a corporation can revoke its S corporation status. This can be done by filing a statement with the IRS, signed by shareholders holding more than 50% of the corporation's stock. The revocation will take effect on the date specified in the statement or, if no date is specified, on the date the statement is filed.
What happens if Form 2553 is filed late?
If Form 2553 is filed late, the corporation may not be able to obtain S corporation status for that tax year. However, the IRS may grant relief for a late election if the corporation meets specific criteria. It's essential to provide a reasonable cause for the delay when requesting relief.
Are there any ongoing requirements for S corporations?
Yes, S corporations must meet ongoing requirements to maintain their status. These include adhering to the eligibility criteria, filing an annual tax return (Form 1120-S), and ensuring that all shareholders are eligible. Additionally, S corporations must avoid certain actions that could jeopardize their status, such as having non-eligible shareholders or more than one class of stock.
What are the tax benefits of filing Form 2553?
The primary tax benefit of filing Form 2553 is the avoidance of double taxation. Instead of the corporation paying taxes on its income, the income is passed through to shareholders, who report it on their personal tax returns. This can lead to significant tax savings, especially for small businesses.
Where can I find IRS Form 2553?
IRS Form 2553 can be found on the IRS website. It is available for download in PDF format, and instructions for completing the form are also provided. If you prefer, you can request a copy from the IRS by calling their customer service.
Filing the IRS Form 2553 is a crucial step for businesses seeking S Corporation status. Understanding the key aspects of this form can make a significant difference in your tax obligations and overall business structure. Here are some essential takeaways to keep in mind:
Taking the time to understand these key points will help you navigate the process smoothly and set your business up for success. Don’t delay in addressing these important aspects!
The IRS Form 2553 is a crucial document for small business owners who wish to elect S corporation status. However, several misconceptions surround this form, which can lead to confusion and potentially costly mistakes. Here are five common misconceptions:
This is incorrect. Once a business elects S corporation status by filing Form 2553, it does not need to file the form again in subsequent years, as long as it continues to meet the eligibility requirements.
Not every business qualifies for S corporation status. Only domestic corporations and certain limited liability companies (LLCs) with specific characteristics can file this form. Businesses with more than 100 shareholders or those with non-resident alien shareholders cannot elect S corporation status.
While S corporation status can provide tax benefits, such as avoiding double taxation on corporate income, it does not automatically result in tax savings for every business. Each situation is unique, and it is essential to evaluate whether this status aligns with the business's financial circumstances.
This is misleading. Generally, Form 2553 must be filed within a specific time frame—typically within two months and 15 days of the beginning of the tax year for which the election is to take effect. Missing this deadline can result in the loss of S corporation status for that year.
This is false. A business can revoke its S corporation status by filing a statement with the IRS, provided that the shareholders agree to the revocation. However, certain restrictions apply, and it is advisable to consult with a tax professional before making such a decision.
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.
Temporary Guardianship Form California Pdf - Intended for short-term arrangements, with specific timelines.
Having a well-structured Employee Handbook is crucial for both employers and employees, as it serves as a comprehensive document detailing the company's policies, procedures, and expectations. By incorporating resources such as Top Forms Online, organizations can easily access templates and guidance that foster a positive workplace culture and ensure compliance with legal obligations, thus helping employees understand their rights and responsibilities within the organization.
Mvt 20-1 - Be aware of deadlines regarding the submission of this form to avoid penalties.
Incorrect Entity Type Selection: Many people mistakenly choose the wrong entity type when filling out the form. This can lead to significant tax implications.
Missing Signatures: Failing to include the necessary signatures can render the form invalid. All required parties must sign to ensure acceptance by the IRS.
Improper Timeliness: Submitting the form late can result in missed deadlines for election. It's crucial to file within the specified time frame to avoid complications.
Incorrect Tax Year: Some individuals select the wrong tax year for their S corporation election. This mistake can create confusion and delay processing.
Omitting Required Information: Leaving out essential details, such as the business's name, address, or EIN, can lead to rejection of the form.
Failure to Meet Eligibility Requirements: Not all businesses qualify for S corporation status. Applicants must ensure they meet all eligibility criteria before filing.
Incorrectly Calculating Shareholder Consent: Shareholder consent is vital. Errors in documenting this can jeopardize the election process.
Not Keeping Copies: Failing to retain a copy of the submitted form can lead to issues later. Always keep a record for your files.
When filling out the IRS Form 2553, which is used to elect S Corporation status, it is important to follow specific guidelines to ensure accuracy and compliance. Here are eight essential dos and don’ts:
The IRS Form 1065 is similar to the IRS Form 2553 in that both are used by partnerships and corporations to report income and other financial information. Form 1065 is specifically for partnerships, allowing them to report their income, deductions, and credits. Like Form 2553, it requires information about the entity and its partners, ensuring that all parties are aware of their tax obligations. Both forms facilitate the flow of information to the IRS, helping to ensure compliance with tax laws.
Completing forms accurately is crucial in the hiring process, just as providing a well-structured application is important for job seekers. For instance, candidates seeking employment are often required to submit an Employment Application Form, which serves a similar purpose in gathering necessary information about their background and qualifications, much like tax forms help businesses manage their financial responsibilities.
Form 1120 is another document that shares similarities with Form 2553. While Form 2553 is used to elect S corporation status, Form 1120 is the tax return filed by C corporations. Both forms require detailed information about the corporation’s financial situation. They also have specific deadlines for submission, and timely filing is crucial to avoid penalties. Understanding the differences between these forms is essential for business owners when determining their tax structure.
The IRS Form 941 is also comparable to Form 2553, although it serves a different purpose. Form 941 is used by employers to report income taxes, Social Security tax, and Medicare tax withheld from employee paychecks. Both forms require careful attention to detail and accurate reporting to ensure compliance. They both play a role in the overall tax responsibilities of a business, though they focus on different aspects of tax reporting.
Form 1065-B, the election for a qualified electing fund, is another document that has similarities to Form 2553. Both forms are used by entities to make elections regarding their tax status. Form 1065-B is specifically for electing certain tax treatments for partnerships, while Form 2553 is focused on S corporation elections. Each form requires specific information about the entity and its members, emphasizing the importance of accurate reporting.
The IRS Form 1120-S is closely related to Form 2553, as it is the tax return that S corporations file. After electing S corporation status with Form 2553, businesses must use Form 1120-S to report their income, deductions, and credits. Both forms require similar information about the business structure and ownership, making them integral parts of the S corporation tax process.
Form W-2 is another document that shares a connection with Form 2553. While Form 2553 is about electing S corporation status, Form W-2 is used to report wages paid to employees. Both forms are essential for tax reporting and compliance. They ensure that the IRS receives accurate information about income, helping to prevent discrepancies and potential audits.
The IRS Form 8832 allows businesses to elect their classification for federal tax purposes, similar to how Form 2553 allows for S corporation election. Both forms require specific information about the business and its owners. They are crucial for determining how the IRS will treat the entity for tax purposes, making it essential for business owners to understand their options.
Form 1066 is another form that has similarities with Form 2553. This form is used by real estate mortgage investment conduits (REMICs) to report income and other financial details. Both forms require detailed financial information and have specific filing requirements. While they serve different types of entities, the underlying principle of reporting to the IRS remains consistent.
Form 1040 is an individual income tax return that can be compared to Form 2553 in the sense that both require accurate reporting of financial information. Form 1040 is for individuals, while Form 2553 is for businesses electing S corporation status. Both forms require taxpayers to provide detailed information about income and deductions, ensuring compliance with tax laws.
Lastly, Form 8862 is relevant as it is used to claim a tax credit after a prior disallowance. While it serves a different purpose than Form 2553, both forms require careful attention to detail and accurate information. Each form plays a role in the broader tax landscape, helping individuals and businesses navigate their tax responsibilities effectively.