What Form 2553 Is For
Form 2553 is the official IRS document that corporations and certain eligible entities use to elect S corporation status under section 1362(a) of the Internal Revenue Code. When you file this form and it gets approved, your business changes from being taxed as a regular corporation (C corporation) to being taxed as an S corporation, which fundamentally changes how your business pays federal income tax.
The key difference is that S corporations use "pass-through taxation." Instead of the corporation itself paying federal income tax on its profits, the income, losses, deductions, and credits flow through to the shareholders, who report these amounts on their personal tax returns and pay tax at their individual rates. This structure helps many small business owners avoid the dreaded "double taxation" that happens with C corporations, where profits are taxed once at the corporate level and again when distributed to shareholders as dividends. However, S corporations can still owe tax on certain built-in gains and passive income at the entity level.
Not every business can elect S corporation status. Your corporation must meet specific requirements: it must be a domestic corporation with no more than 100 shareholders, all shareholders must be individuals, certain trusts, or estates (not partnerships or corporations), you can have no nonresident alien shareholders, and you can only have one class of stock. Additionally, certain types of corporations like insurance companies and domestic international sales corporations are ineligible.
When You’d Use Form 2553 (Including Late or Amended Elections)
The timing of your Form 2553 filing is crucial. For the election to take effect for the current tax year, you must file the form no more than two months and 15 days after the beginning of that tax year. Alternatively, you can file it anytime during the preceding tax year. For example, if your calendar-year corporation wants S corporation status beginning January 1, you must file Form 2553 between January 1 of the prior year and March 15 of the current year.
For brand-new corporations filing for their first tax year, the two-month-and-15-day period begins on the earliest of three dates: when the corporation first had shareholders, first had assets, or began doing business. If you're converting from C corporation to S corporation status mid-operation, careful timing ensures your election begins when you want it to.
Late S Corporation Elections
Many businesses miss the deadline, but the IRS offers relief for late elections under Revenue Procedure 2013-30. If you file late but can show reasonable cause for the delay and meet specific requirements, the IRS may still accept your election retroactively.
To qualify for this simplified relief, you must demonstrate that you intended to be classified as an S corporation on your desired effective date, you failed to file solely because you missed the deadline (not because you were ineligible), you have reasonable cause for the failure, you file Form 2553 within three years and 75 days of your intended effective date, and all shareholders have reported their income consistently with S corporation status.
If you meet these conditions, write "FILED PURSUANT TO REV. PROC. 2013-30" in the top margin of Form 2553 when you submit it.
Exceptions and Private Letter Rulings
There's even an exception to the three-year-and-75-day limit if at least six months have passed since you filed your first intended S corporation return, you've consistently reported as an S corporation, and the IRS hasn't notified you of any problems within those six months.
If you don't qualify for these provisions, you'll need to request a private letter ruling and pay a user fee, which is significantly more expensive and time-consuming.
Key Rules or Details for the Tax Year
Several fundamental rules govern Form 2553 elections.
Shareholder Consent Requirement
First, every single shareholder who owns stock on the date you file the election must consent to it by signing the form or a separate consent statement. If an individual and their spouse have a community property interest in the stock, both must sign. This unanimous consent requirement is non-negotiable, and missing even one signature can invalidate your election.
Choosing a Tax Year
Second, you must choose your corporation's tax year on the form. Most S corporations use a calendar year ending December 31, but you can request a different fiscal year if you can establish a business purpose or meet other specific tests. If you want a fiscal year, you'll need to complete Part II of the form and potentially pay a user fee of several thousand dollars for the IRS to review your business purpose justification.
Duration of the Election
Third, once your S corporation election is accepted, it remains in effect indefinitely until it's either revoked by the shareholders or terminated because the corporation no longer meets the eligibility requirements. If your election is terminated or revoked, the IRS generally won't allow you to make another S corporation election for five years without obtaining consent.
Where and How to File
Fourth, you must file Form 2553 with the correct IRS Service Center based on your principal business location. The filing addresses have changed over time, so always verify the current mailing address on the IRS website before sending your form. You can mail the original form (the IRS emphasizes "no photocopies") or fax it to the designated number for your region.
Proof of Filing
Fifth, keep proof of filing. Acceptable evidence includes a certified or registered mail receipt with a timely postmark, a copy of Form 2553 with an IRS acceptance stamp, a copy with a stamped IRS received date, or an IRS letter confirming acceptance. This documentation can be critical if the IRS later questions whether you filed the election.
Step-by-Step (High Level)
Filing Form 2553 involves several key steps that require attention to detail.
Step 1: Confirm Eligibility and Get the Form
Start by obtaining the current version of Form 2553 from IRS.gov and carefully reading the instructions. Verify that your corporation meets all eligibility requirements before proceeding, because filing when ineligible wastes time and may create complications.
Step 2: Complete Part I – Corporation Information
In Part I of the form, provide your corporation's basic information: its legal name exactly as shown in your corporate charter, employer identification number (EIN), address, and the date of incorporation. If you haven't received your EIN yet, you can write "Applied For" and the date you applied. Check the appropriate boxes if you've changed your corporation's name or address since obtaining the EIN.
In item E, enter the effective date when you want your S corporation election to begin, following the timing rules discussed earlier. In item F, select your corporation's tax year, checking box 1 if you're using a calendar year or boxes 2–4 if you're requesting a different tax year (which requires completing Part II).
Step 3: Complete Shareholder Information and Consents
The shareholder information section requires meticulous accuracy. List every single shareholder in columns J through N, providing their name, address, social security number or EIN, number of shares owned (or ownership percentage for LLCs), dates the shares were acquired, and the shareholder's tax year end.
This is where you'll also collect each shareholder's consent signature and date in column K. Remember that certain shareholders like minors, estates, and trusts have special rules for who signs the consent.
Step 4: Complete Additional Parts if Required
If you're requesting a fiscal tax year, complete Part II by checking the appropriate box explaining your qualification (natural business year, ownership tax year, business purpose, or section 444 election). Box Q1 requires attaching a detailed statement establishing your business purpose and will trigger a user fee. The instructions provide specific tests and evidence you'll need to meet for each type of fiscal year request.
If you're making a Qualified Subchapter S Trust (QSST) election simultaneously with your S corporation election, complete Part III with the trust and beneficiary information.
If you're also making a late entity classification election (for an LLC to be treated as a corporation, for example) on the same effective date, complete Part IV with the required representations.
Step 5: Sign and Submit the Form
Finally, an authorized corporate officer must sign and date the form at the bottom of Part I. Acceptable signers include the president, vice president, treasurer, assistant treasurer, chief accounting officer, or another officer authorized to sign. An unsigned Form 2553 won't be accepted, no matter how perfect the rest of it is.
Common Mistakes and How to Avoid Them
Missing the Filing Deadline
One of the most frequent errors is missing the filing deadline, often because business owners don't realize how quickly that two-month-and-15-day window closes. Mark your deadline on multiple calendars and set reminders well in advance.
Incomplete Shareholder Consent
Incomplete shareholder consent is another major pitfall. Review your shareholder list carefully and ensure you've obtained every required signature. Don't forget about community property spouses who must sign even if they're not listed as direct shareholders.
Inconsistent or Incorrect Information
Many filers provide incorrect or inconsistent information across different sections of the form. Double-check that shareholder names, addresses, and social security numbers match exactly what's on file with the IRS and Social Security Administration.
Improper Tax Year Selection
Choosing an improper tax year without adequate justification is another common error. Unless you have a genuine business purpose or meet specific tests for a fiscal year, stick with the calendar year.
Failure to Keep Proof of Filing
Failing to keep proof of filing has caused problems for many businesses years after they thought their election was secure. Always use a mailing method that provides tracking and delivery confirmation.
Filing the Wrong Return After Election
Finally, many businesses forget that even after filing Form 2553, they must actually operate as an S corporation and file the appropriate returns. File Form 1120-S instead of Form 1120 starting with your first tax year as an S corporation.
What Happens After You File
After you submit Form 2553, the IRS Service Center will process your election and send you a notification. You should generally receive a determination within 60 days of filing. If you requested a business purpose fiscal year by checking box Q1, the process takes longer—expect approximately 150 days total (60 days for initial processing plus 90 additional days for the ruling letter).
Acceptance of Your Election
If your election is accepted, your corporation is now officially an S corporation as of the effective date shown on the form. You must begin filing Form 1120-S, issuing Schedule K-1s to shareholders, and operating in compliance with S corporation rules.
No Response From the IRS
If you don't receive any response within the expected timeframe, don't assume your election was accepted. If two months pass without notification (or five months if you requested a fiscal year), call the IRS Business and Specialty Tax Line at 1-800-829-4933 to check the status.
If Your Election Is Rejected
If your election is rejected, the IRS will explain the specific reason. Common rejection reasons include missing shareholder signatures, ineligibility due to shareholder type or number, missed deadlines without qualifying for relief, or incomplete information on the form. Read the rejection notice carefully and address the specific issues identified.
FAQs
Can I file Form 2553 electronically?
Currently, the IRS does not accept electronic filing of Form 2553 itself. You must file by mail or fax to the appropriate Service Center based on your business location.
What happens if I forget to file Form 2553 before the deadline?
Missing the deadline doesn't necessarily mean you've lost the opportunity for S corporation status. Under Revenue Procedure 2013-30, you can file a late election and receive retroactive relief if you meet specific requirements.
Do all shareholders really need to sign the form?
Yes, unanimous shareholder consent is mandatory. Every person or entity that owned stock on the date you file Form 2553 must consent to the election.
Can I revoke my S corporation election if it's not working out?
Yes, you can revoke an S corporation election at any time, but there are specific procedures and consequences, including a general five-year waiting period before re-election.
What's the difference between Form 2553 and Form 8832?
Form 8832 allows eligible entities to choose their federal tax classification. Form 2553 is specifically for electing S corporation status. Some entities may need to address both, depending on their situation.
Do I need to file Form 2553 with my state as well?
Form 2553 only affects your federal tax status. Many states require a separate S corporation election, while others automatically follow the federal election.
How long does S corporation status last?
Once accepted, your S corporation election continues indefinitely until it is revoked or terminated due to loss of eligibility.
Sources
All information in this summary comes from official IRS publications, including Form 2553 and its instructions, IRS guidance on S corporations, Revenue Procedure 2013-30 on late election relief, and related IRS.gov resources.
